WEBVTT - Here's Why: The Iran war resets the energy transition 0:00:00.240 --> 0:00:02.960 Hi, it's uck shot. The war in the Middle East 0:00:03.120 --> 0:00:06.640 continues to royal energy markets. But it's not just fossil 0:00:06.680 --> 0:00:10.000 fuels that have been affected. This crisis is going to 0:00:10.080 --> 0:00:13.720 reshape the transition to clean energy. I got a chance 0:00:13.760 --> 0:00:16.919 to talk about it with Stephen Carroll for Bloomberg's Here's 0:00:17.000 --> 0:00:25.920 Why podcast. Take a listen Bloomberg Audio Studios, Podcasts, Radio News. 0:00:28.160 --> 0:00:32.360 The war Indi Middle East is creating the largest supply 0:00:32.520 --> 0:00:38.559 disruption in the history of the global oil market. If 0:00:38.600 --> 0:00:41.440 the IEA wasn't out there warning this is the worst 0:00:41.520 --> 0:00:45.240 energy crisis in human history and saying release your reserves now, 0:00:46.120 --> 0:00:49.280 then you'd have a much higher energy price. But they're 0:00:50.240 --> 0:00:52.559 one trick ponies. They're not going to last. Can you 0:00:52.680 --> 0:00:56.920 can't print electrons, baby, in print US dollars, but you're 0:00:56.920 --> 0:00:57.960 not going to print electrons. 0:00:58.040 --> 0:01:00.560 Apart from reopening this straight upward me which of course 0:01:00.760 --> 0:01:03.600 Trump can't do, what can be done to lower the 0:01:03.600 --> 0:01:07.120 oil price effectively and sustainably. Nothing, And I think that 0:01:07.319 --> 0:01:10.800 is the fundamental problem we have over here. Other than 0:01:10.880 --> 0:01:14.240 the chokepoint being removed, you do not have the substitute 0:01:14.440 --> 0:01:15.920 for this volume anywhere else. 0:01:16.480 --> 0:01:19.480 The war in Iran has delivered an unprecedented shock to 0:01:19.560 --> 0:01:23.039 global oil and gas supplies. Prices surged, and for the 0:01:23.080 --> 0:01:25.720 second time in four years, many countries are looking for 0:01:25.800 --> 0:01:29.520 alternative sources of energy. This disruption is happening at a 0:01:29.560 --> 0:01:32.600 time when politicians have been turning cold on the push 0:01:32.600 --> 0:01:36.480 for renewables. So will countries double down on fossil fuels 0:01:36.800 --> 0:01:39.080 or will they speed up the move to clean energy? 0:01:39.760 --> 0:01:46.039 Here's why the Iran War resets the energy transition. Our 0:01:46.080 --> 0:01:49.520 senior climate reporter Akhat radio host of our Zero podcast, 0:01:49.880 --> 0:01:53.800 joins us now for more actuat. First, of all, before 0:01:54.200 --> 0:01:57.800 the Iran War began, how would you characterize the conversation 0:01:58.440 --> 0:02:01.720 around the energy transition, seeing that many countries were following 0:02:01.720 --> 0:02:03.360 the US and pulling back. 0:02:03.840 --> 0:02:07.080 I think fossil fuel economies, or at least countries that 0:02:07.160 --> 0:02:10.880 have access to domestic fossil fuels, were doubling down on 0:02:10.960 --> 0:02:13.640 fossil fuels. But we were also seeing a move in 0:02:13.680 --> 0:02:18.160 countries that were heavily dependent on importing fossil fuels toward 0:02:18.320 --> 0:02:23.200 clean energy. This Iran war is the second energy shock 0:02:23.360 --> 0:02:26.760 in a decade, and in regions like Europe and much 0:02:26.760 --> 0:02:30.160 of Asia, we were already seeing a speeding up of 0:02:30.280 --> 0:02:33.919 a move towards clean energy, and this war is only 0:02:33.960 --> 0:02:36.359 going to add an accelerant to that move. 0:02:37.000 --> 0:02:40.639 This has once again become a conversation around energy security. 0:02:41.240 --> 0:02:45.560 Our renewable energy sources like solar and wind more secure 0:02:46.120 --> 0:02:47.520 than oil and gas supplies. 0:02:48.040 --> 0:02:50.680 I think the conversation on the energy transition in general 0:02:50.760 --> 0:02:55.280 has been moving away from emissions and decarbonization toward security 0:02:55.639 --> 0:03:00.400 ever since Russia attacked Ukraine, and renewables are being seen 0:03:00.680 --> 0:03:04.799 in that security lens as being available domestically, most countries 0:03:04.880 --> 0:03:09.040 have plenty of wind and sun available, and the question 0:03:09.120 --> 0:03:13.080 now is around affordability and reliability. Can you make these 0:03:13.600 --> 0:03:17.320 intermittent sources of renewables last for longer and can you 0:03:17.480 --> 0:03:20.399 deploy them because the upfront cost is still more expensive 0:03:20.840 --> 0:03:24.080 but over their lifetime cheaper. Can you deploy them with 0:03:24.160 --> 0:03:28.720 the affordability constraints that many economies have, even European economies 0:03:28.880 --> 0:03:32.280 really can't borrow all that much more than they already have, 0:03:32.639 --> 0:03:35.640 And of course emerging economies have always struggled to borrow 0:03:35.880 --> 0:03:39.880 huge sums of money, So that is where the constraints 0:03:39.880 --> 0:03:43.160 on moving to clean energy really come from. The security 0:03:43.240 --> 0:03:44.800 question has actually been settled. 0:03:45.400 --> 0:03:50.760 Where are we in the technology around the reliability of 0:03:50.880 --> 0:03:55.880 these renewable energy sources? Can they provide a full replacement 0:03:56.000 --> 0:03:57.160 for fossil fuels. 0:03:58.080 --> 0:04:01.119 Any energy equation is really a trade of you have 0:04:01.680 --> 0:04:05.320 sources of energies that have benefits and down sides, and 0:04:05.360 --> 0:04:07.680 as we're seeing in fossil fuels, yes, they can be 0:04:07.720 --> 0:04:11.120 stored and moved around and power the economy most of 0:04:11.160 --> 0:04:13.760 the time. But of course if you have a war 0:04:13.840 --> 0:04:16.120 and you don't have access to those fossil fuels, then 0:04:16.160 --> 0:04:19.560 you can't use them. On renewables, There's always been the 0:04:19.600 --> 0:04:23.200 intermittency question, but because of the pace at which the 0:04:23.279 --> 0:04:26.760 price of batteries has fallen, that question is becoming easier 0:04:26.800 --> 0:04:29.719 and easier to answer. So solar and wind cannot be 0:04:29.760 --> 0:04:33.080 an answer to fossil fuels on their own, but combining 0:04:33.120 --> 0:04:37.120 them with batteries, with nuclear power, with geothermal, that combination 0:04:37.279 --> 0:04:40.080 can really do a lot to try and reduce the 0:04:40.160 --> 0:04:41.920 dependency on fossil fuels. 0:04:42.400 --> 0:04:44.960 You i mentioned this is the second major energy shock 0:04:45.040 --> 0:04:46.960 in a decade, of course, the last one being around 0:04:47.040 --> 0:04:51.200 Russia's invasion of Ukraine. Does a crisis like this help 0:04:51.279 --> 0:04:54.440 to push an economy towards renewable sources. 0:04:54.960 --> 0:04:58.719 Well, we don't even have to prognosticate very hard. You 0:04:58.720 --> 0:05:01.560 should just look at what the nineteen seventy three oil 0:05:01.600 --> 0:05:05.960 crisis followed by the nineteen seventy nine oil crisis did 0:05:06.080 --> 0:05:09.440 to countries that were importing fossil fuels. They moved into 0:05:09.640 --> 0:05:13.799 nuclear energy, spent a lot of energy research money into 0:05:13.920 --> 0:05:17.240 solar and lithium ion batteries, and we saw a sharp 0:05:17.320 --> 0:05:20.480 decline in how much energy the world was getting from 0:05:20.520 --> 0:05:25.320 oil relative to other sources of energy over the next decade. 0:05:25.400 --> 0:05:29.039 This time around this double shock, many are saying, including 0:05:29.360 --> 0:05:32.440 the head of the International Energy Agency, which was created, 0:05:32.480 --> 0:05:35.560 of course after the nineteen seventy three oil shock, that 0:05:35.920 --> 0:05:40.240 these two dual shocks will have a major impact on 0:05:40.320 --> 0:05:44.120 the decisions that governments and individuals will be making on 0:05:44.279 --> 0:05:48.280 their energy choices, and renewables will certainly get a boost. 0:05:48.560 --> 0:05:51.400 You make an interesting point there about both the individual 0:05:51.480 --> 0:05:54.760 behavior and the government behavior. I wonder which is the 0:05:54.760 --> 0:05:58.160 most important driver. Is it what consumers want to need 0:05:58.279 --> 0:06:01.160 or is it how governments are, perhaps in some cases 0:06:01.200 --> 0:06:02.960 politically willing to act. 0:06:03.720 --> 0:06:06.320 So for the first two decades of the century, the 0:06:06.400 --> 0:06:09.640 clean energy question was really a government question because you 0:06:09.720 --> 0:06:12.040 needed all these policies and you needed to bring down 0:06:12.080 --> 0:06:15.520 the cost of solar panels and batteries. It's only really 0:06:15.560 --> 0:06:18.280 in the twenty twenties that the consumer has come into 0:06:18.279 --> 0:06:21.640 the equation, and actually today the consumer is in the 0:06:21.720 --> 0:06:24.279 driving seat. So take the example of what happened in 0:06:24.320 --> 0:06:29.520 Pakistan after the gas crisis created by Russia attacking Ukraine. 0:06:29.640 --> 0:06:33.320 We saw a major boost in imports of solar panels 0:06:33.320 --> 0:06:38.640 and batteries, mostly done by private businesses and individuals who 0:06:38.920 --> 0:06:42.520 wanted reliable power supply which the state wasn't able to 0:06:42.600 --> 0:06:46.920 provide because it could not import any liquefied natural gas. 0:06:47.800 --> 0:06:49.880 Is it to places like Pakistan that we should be 0:06:49.920 --> 0:06:53.240 looking as to where these advances might happen most quickly? 0:06:53.279 --> 0:06:55.679 Are there certain regions of the world which we feel 0:06:55.720 --> 0:06:58.480 will accelerate this shift after this crisis? 0:06:59.040 --> 0:07:01.520 We know the Strait of Hornor supplies most of its 0:07:01.560 --> 0:07:04.840 fossil fuels to Asian economies, and it's natural to look 0:07:04.880 --> 0:07:09.280 to them, But certain Asian countries are heavily dependent on 0:07:09.320 --> 0:07:13.000 the import So even today Pakistan gets ninety nine percent 0:07:13.120 --> 0:07:17.600 of its LNG from Qatar. Bangladesh gets about seventy five 0:07:17.600 --> 0:07:20.960 percent of it. Places like Japan and South Korea are 0:07:21.000 --> 0:07:24.360 still very heavily reliant on having gas in their power mix. 0:07:24.800 --> 0:07:28.040 Those economies is where I will be looking for this 0:07:28.120 --> 0:07:32.080 move toward clean energy. China, which gets an absolute amount 0:07:32.240 --> 0:07:34.400 a lot of oil and gas from the state of 0:07:34.400 --> 0:07:38.160 hoharmuse in relative amount is actually small, and it is 0:07:38.200 --> 0:07:41.080 the country that has built the most amount of clean 0:07:41.200 --> 0:07:44.600 energy at home and the capacity to deploy all this 0:07:44.680 --> 0:07:48.520 clean energy not just at home but everywhere around the world. 0:07:48.920 --> 0:07:52.920 And there is plentiful supply of solar panels and batteries, 0:07:53.080 --> 0:07:56.320 if anything, that's over capacity. We've been warned before this 0:07:56.480 --> 0:08:00.160 energy crisis started. So there is a competitive advantage that 0:08:00.240 --> 0:08:03.880 clean energy has right now in a world where fossil 0:08:03.880 --> 0:08:05.240 fuels are getting constrained. 0:08:06.120 --> 0:08:09.320 If prices come back down for oil and gas at 0:08:09.320 --> 0:08:12.600 some point, is that going to take away this renewed impetus. 0:08:13.120 --> 0:08:15.520 Ever since the war began, that has been a big 0:08:15.600 --> 0:08:18.240 question we have to ask, which is how long will 0:08:18.320 --> 0:08:22.440 high prices last? And it certainly matters for how much 0:08:22.560 --> 0:08:26.920 governments and individuals will make decisions about their energy hungry 0:08:27.240 --> 0:08:32.000 devices and industries based on those prices. What we now 0:08:32.080 --> 0:08:35.319 know nearly a month into the war, is that even 0:08:35.480 --> 0:08:39.160 if it ends tomorrow, the disruption is going to last 0:08:39.160 --> 0:08:42.960 for weeks and months, and so prices may fall. But 0:08:43.120 --> 0:08:46.439 this shock has now hit in a way where governments 0:08:46.440 --> 0:08:51.600 and individuals cannot psychologically disconnect from what just happened. And 0:08:51.920 --> 0:08:55.160 if it doesn't boost clean energy tomorrow, it will have 0:08:55.240 --> 0:08:59.760 a long term boost that wasn't there before the war started. 0:09:00.320 --> 0:09:03.200 Okay, akshat Rathy, our senior climate reporter, Thank you very 0:09:03.280 --> 0:09:05.160 much for joining us, and you can hear more from 0:09:05.160 --> 0:09:09.480 Macshott on his Bloomberg podcast zero. For more explanations like 0:09:09.520 --> 0:09:12.280 this from our team of three thousand journalists and analysts 0:09:12.320 --> 0:09:15.480 around the world, go to Bloomberg dot com slash explainers. 0:09:17.160 --> 0:09:19.920 I'm Stephen Carroll. This is here's why. I'll be back 0:09:19.960 --> 0:09:21.880 next week with more. Thanks for listening.