Why The Iran War Is Speeding The End Of The Fossil Fuel Era

0:01This episode is brought to you by Focus Features. On March 27th, Focus Features invites you to be a part of the most explosive movie of this year's Sundance and South by Southwest film festivals. The AI Doc, or How I Became an Apocaloptimist, is being called supremely entertaining and the most urgent movie of our time. The AI Doc, or How I Became an Apocaloptimist, rated PG-13, only in theaters March 27th. Have Donald Trump and Benjamin Netanyahu done the renewables industry a massive favor? War in the Middle East looks to be speeding the end of the fossil fuel era. The attacks on Iran by the United States and Israel have led to the effective closure of the Strait of Hormuz.

0:44That's the waterway by which a fifth of global oil and a fifth of seaborne gas pass through. And drone and missile strikes in the region have forced gas and oil production right down and the closure of some ports. All this has put the cost of oil right up. And if prices stay as high as they are now for the rest of the year, countries that import fossil fuels, so most countries, will have to spend an additional$400 billion. But if countries fully deployed all their renewable energy projects, including ones for electric vehicles and heat pumps, then the cost could be reduced by 70%. And that's what we're getting into on this episode of The World, the Universe and Astronomy Scientist.

1:26I'm Dr Rowan Hooper. So to get into this, we're joined by climate reporter Alec Loon. Alec, at first glance, it's hard to compute that the war could speed the transition to clean energy when the U.S.'s government is actively trying to slow it down. But there is a precedent with the Ukraine war, isn't there? That's right. We've already seen this happen once before when Russia invaded Ukraine and then weaponized natural gas going to Europe. And Europe was also kind of reminded of how dependent it was on Russian energy imports. And it also cut those as much as it could. So while it didn't cut them off completely, Europe did try to pivot and was forced to pivot a bit towards renewable energies by this Ukraine energy crunch.

2:15And so after that happened, the European Union, for instance, more than doubled the amount of solar energy it was building each year. And the UK increased its solar energy build out by about two thirds and also wind continuing to be built as well. So a real rise in renewables happened in Europe after this last crisis. and now the same thing could be happening for other countries in the world because although that was a huge energy shock for the world market when after the ukraine war this is going to be an even bigger shock even more widespread shock that will touch most every country in the world yeah and especially a lot of asian countries right big and small so they could be seeing effectively what happened in Europe that, well, they're seeing that right now.

3:06And you spoke to Pavel Mulchanov at Raymond James and Associates, that's an investment consultancy. And here's what he had to say about Asia's wake-up call. So the wake-up call, I think, will be pushing for more renewables within the electricity mix, because again, fossil fuels are subject to disruption. That's the reality. And these disruptions can come for different reasons. So this is obviously renewable power is mostly a matter for government policy and big businesses, electric utilities to make these changes. At the consumer level, I think it will strengthen EV demand. So a smaller country is already pivoting.

3:51Are you seeing them already pivot towards accelerating their transition to renewables? It's hard to say because obviously, you know, the renewable energy build out data that comes in once a year, you know, well after the year is concluded kind of thing. So you don't see it. You can't really trace it in real time. But from the political statements, it definitely appears that they are looking at renewables much more closely. A couple of things I've seen. So South Korea, for instance, has said that it's going to fast track renewable energy projects, fast track the permitting, fast track the grid connections for them to try and get them online that much faster.

4:28And also India's Prime Minister Narendra Modi was saying at an energy conference last week that his country's shift towards solar and India has been building a huge amount of solar. And he's saying that solar energy and more electric vehicle use is going to allow India to stop being so dependent on foreign oil imports because they've been hit really hard by this Strait of Hormuz crisis. Yeah. OK, so there is some good signs politically that there is an increased will to sort of get off the fossil fuels or at least ramp it down a bit. And talking of ramps, I saw a statement by Antonio Gutierrez, the secretary general of the UN, saying that this conflict could be could be an exit ramp to get off our dependence on fossil fuels.

5:16And he said homegrown renewable energy has never been cheaper, more accessible or more scalable. the resources of the clean energy era cannot be blockaded or weaponized, like you were just talking about what happened in Ukraine. There are no price spikes for sunlight and no embargoes on the wind, he said. Yeah, and it's an energy security issue more than anything else. There's kind of two factors, I guess, at play. One is, yeah, the energy security. It doesn't feel good when suddenly you're having to deal with domestic political problems. You know, restaurants in India are shutting down early or cutting their menus because they just don't have enough cooking gas to make dishes.

5:57You know, in Southeast Asia, they're going to four-day work weeks to try and ration the use of fuel. So, I mean, this is causing huge upheaval in Asia especially. And that's not a good look for local politicians. They have to deal with this crisis then, and they don't like to have to suddenly have this crisis on their plate. The other thing that's going on is the price, right? Oil is over$100 a barrel if you look at Brent crude. Natural gas prices, that's a much more regional thing. So they're only up a little bit in North America, for instance. But in Asia, natural gas prices are up a lot. And so that will encourage countries to look more towards renewables.

6:37So about the energy transition, you spoke to Sam Butler-Sloss at Ember, an energy transition think tank, and here's what he had to say about the transition. The conflict in Iran almost certainly is going to be an accelerator on the energy transition, because you have a price impact that is hurting the things that are being substituted. And so as prices go up, as the awareness of the fragility of the fossil system rises, it becomes ever clearer that nations need to find more secure energy forms. and where few in the world have the lack of geography to sit on fossil fuel reserves. Everywhere in the world is in a location that receives plentiful solar and wind potential.

7:27Now we're at a point today where that solar and wind potential has always been there. You can harvest it cheaper than its fossil competition. And secondly, we're in a point where you can use those cheap, secure electrons in all parts of your economy via electrification. I guess two things to pick out here. Because oil is largely carried by tankers around the world, that is being impacted much more than gases because a lot of gas is carried by pipelines. And so what's really being, when we say that 20 % of seaborne gas is being stopped because of the Strait of Hormuz being closed, that's actually only 3 % of gas supplies total.

8:13Wow. Because a lot of the gas is through pipelines on land. What is really impacting is liquefied natural gas that's coming by tanker from Qatar mainly and also the UAE. And so it kind of depends on whether you have a gas pipeline or not, whether you're going to be really hit by this gas effect, right? And so some countries like Japan, South Korea, Taiwan especially, are being hit really hard because they depend on liquefied natural gas through the Strait of Hormuz for almost all their gas needs or a majority of their gas needs. And so that's going to be a long-term stimulus for them to look at renewable energy, solar, and wind.

8:53The oil shock is bigger, a bigger shock to the market in the short term, but it's everywhere, right? Whereas the gas shock really depends on what kind of setup you have, whether you have a pipeline or not. The oil shock is for everybody. Oil prices go up everywhere. Even in the United States, the world's number one oil producer, prices at the pump are way up. People are taking photographs in Los Angeles in front of gas station signs that say$8 a gallon. So basically everyone everywhere is encouraged to buy an electric vehicle by these high oil prices.

9:48sponsored job credit at indeed.com slash podcast. Terms and conditions apply. And this is going to have, there could be some real winners in this, right? And I'm thinking of China, especially producing so many electric vehicles, but also solar panels. I mean, is China set to ramp up even more its production and its export of this renewable tech? China is definitely going to be exporting a lot of renewable tech. I mean, it has the capacity and it's been selling that abroad. And it's gotten so cheap for countries to buy solar panels that this is what a lot of those developing countries are going to look towards, probably, if the pass is any indication.

10:27After the Ukraine crisis, for instance, liquefied natural gas got very expensive because Europe was snapping it all up and willing to pay a high price for it. And so countries like Pakistan were left out in the cold, basically, because they couldn't compete with Europe on the price for natural gas. And so Pakistan had an unprecedented solar build-out that was actually done from the grassroots. People were just going and buying Chinese solar panels and putting them on their roof or on their balcony without the government's participation at all, basically. And Pakistan now gets a huge fraction of its energy from rooftop solar just over the course of a couple of years that's changed completely.

11:07So countries like that, as the LNG prices, as they get priced out of the market, they're going to be turning towards cheap Chinese solar. Diesel prices are up. So you think about villages in Africa, for instance, that aren't connected to the grid and rely on a diesel generator to keep the lights on. Next time they have to buy a generator, they're going to think twice and they might go for cheap Chinese solar panels because that's going to be more the payback period on a cheap Chinese solar panel installation has basically gotten shorter because diesel is so much more expensive. So yeah, it's going to have huge impacts around the world for different reasons in different places.

11:44I guess one thing to point out then about China, everyone wonders what China is going to, what this is going to mean for China, because China is the world's biggest emitter. And it's an interesting thing because China, on the one hand, they're building more solar and more wind than the rest of the world combined. So they're already accelerating their energy transition, right? So some people say, well, they'll accelerate it even more because they're also very exposed to oil imports from the Strait of Hormuz. About 40 to 50 % of China's oil comes through the Strait of Hormuz. But the other thing that China has is alternate energy supplies.

12:20Coal. Fossil, yes. So China mines a lot of coal, and we expect that China's going to ramp up its coal energy generation to cope with this energy crisis. So they're going to be burning more coal and they also can get gas. They have pipelines for gas from Russia and they have alternative oil pipelines so they can get oil piped in as well from the Middle East. So China's probably going to be doing this all of the above strategy that they've been doing where they do more wind and solar than the rest of the world, but they also have fossil fuel supplies that they can fall back on. And, you know, this isn't just China.

13:01South Korea said it's going to be burning more coal as well. A lot of countries in the short term especially are going to be burning more coal to catch up, which means that there's going to be kind of this kind of weird catch-22 where although the energy transition might be accelerated in the long term, in the short term, We might actually see more carbon emissions as countries burn more coal to make up that gap. Also, nuclear energy is going to be a winner here. OK, just before you get into nuclear, because I think people forget that China isn't expanding its solar production and all over the last few years out of the goodness of its heart.

13:39It's doing it because it wants to grow above all else. And that's why, as well as all the solar and wind it's been investing in, it's also still been producing loads of emissions. It's still been burning loads of fossil fuel. So it's not going to stop that. Like you say, it does all of the above all the time. As much as it can, it's grow, grow, grow. And that's what it wants to do. So because of this conflict, as it spreads out, as you say, we might see it might get worse before it gets better. but it still looks like it could have pushed it faster than it was going anyway. Is that what we're thinking?

14:17I think so. I mean, obviously, the Gulf states are repositioning. There are pipelines they can use to get around the Strait of Hormuz and they are starting to do that. There are ways for natural gas and oil to get out around the Strait of Hormuz and they might invest in new pipelines having been through this experience now. But that said, I think most people expect that we're not going back to$70 a barrel of oil anytime soon. It's going to remain elevated. Even if the Gulf states do build new pipelines, that's a big capital infrastructure cost, and that's going to be passed on to the consumer.

14:54So I think most people are expecting oil prices and gas prices to remain at least higher than they were before the attack on Iran. And even if they come down a bit, they're still going to be more expensive and that's going to make renewables look all the more cost effective. Yeah. Okay. What about nuclear though? Because that takes longer to deploy and develop than renewables like solar and wind. So how is that going to benefit? So far, nuclear is benefiting because there are a lot of places in the world that have shuttered their nuclear power plants after stuff like the 2011 Fukushima disaster, for instance.

15:35And now that decision in an age where we not only have this Iran crisis and the Strait of Hormuz blocked up, but we also have a growing energy demand across the world from data centers and AI, that decision to shutter nuclear reactors is looking pretty stupid to a lot of policymakers. They're regretting that. And so places like South Korea have said they're going to ramp up the capacity, their existing capacity, the reactors that are running already are going to be running at a higher rate. And places like Japan are expected to now start reopening nuclear reactors at a greater rate. Even in the European Union, they're talking about how they may be shifted away from nuclear a little bit too soon.

16:18So there's a lot of kind of shuttered nuclear capacity around the world that could be brought back online. Now, when you start talking about building new nuclear, which is also in the conversation, and Japan is expected to talk about that with the United States when Trump meets his Japanese counterpart soon, that's a much more long-term kind of thing. It takes a long time to design, build, and importantly, get permissions for a nuclear power plant. So even if there is a boost to new nuclear build out, it's not going to come to fruition until the 2030s, maybe even the 2040s. All right. So look, we're excited about this acceleration to the end of the fossil fuel era.

17:00But here in the UK, we're still seeing potential new exploration in the North Sea. What is going to make countries actually say we are going to turn away from fossil fuels and invest in renewables? Yeah, I think it's, again, a combination of those two factors, energy security plus the price. Nobody likes it when they're suddenly at the whims of Donald Trump and whatever he decides to do in the Middle East. That's being reinforced. The vulnerability of so many countries, three-fourths of people in the world live in countries that are fossil fuel importers. That means that the majority of the world is at the whims of Donald Trump right now, and that's not a good feeling for local policymakers.

17:41The second thing is the prices are probably going to remain elevated even if they come down a bit. And even if oil comes down to$85 a barrel, that's still an extra$200,$300 billion that fossil fuel importing companies will have to shoulder this year. So those two things are going to continue to drive this, and every project is going to be weighed on its own merits, but the renewable project is going to have this added plus. Now, that said, there are the people, consumers, voting with their wallet as well. And so if prices are high at the pump, which they likely will remain to be fairly high, then people are going to be that much more inclined to buy an electric vehicle when they go to purchase their next car.

18:24That said, this all takes a while to trickle down into the actual energy system, right? A car stays on the road for 18, 20 years on average. So even if people are buying more EVs, you don't necessarily see the fleet of cars on the road suddenly shift. It takes two decades to kind of trickle down where you suddenly see a lot more EVs on the road. So this is not an instantaneous, game-changing event where suddenly the energy transition is going to happen overnight. It is an acceleration of the energy transition. It's going to speed it up, but it's going to still be a very long-term process. Yeah, and I think it's really important that the political will that we've mentioned in this chat, some of the politicians, some of the things they've been saying have been different.

19:12It does feel like we've turned a corner to hear politicians like of, you know, centre parties talking about we need to invest in renewables, which a lot of them have, does feel different. So, okay, of course, it's not going to be overnight, but it does feel like there's something different that's happened. Yeah, and you expect the United Nations, Guterres and Simon Steele to be saying this kind of thing that, you know, we need the energy transition for energy security. But you're hearing it from, you know, Narendra Modi. I mean, you're hearing it from Keir Starmer in the UK. You're basically hearing it from everyone except Donald Trump that, you know, energy security is important.

19:52and a lot of them are saying renewables are part of that energy security. Great. Thanks, Alec. We'll leave it there. That's Alec Loon. This is The World, The Universe, and Us from New Scientist. I'm Rowan Hooper, and do subscribe and follow for more like this. Bye for now.

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