How Renewable Energy Could Set the Stage for Future Resource Conflict
By Tom Johansmeyer, ARM
We’ve heard about wars fought for oil for the past century, even if the concept has been exaggerated a bit. In the future, the contested commodity could shift from fossil fuels to water. More than 15% of the world’s water conflicts over the past 4,000 years have arisen since 2020. The notion that wars are fought for resources is almost beyond dispute, and there could be more drivers of conflict coming. Often seen as an alternative to fossil fuels, for which wars clearly have been fought, renewable energy could lead to its own resource conflicts.
The push for renewable energy sources through 2035 and 2050 makes the need for wind and other forms of renewable power obvious. Unfortunately, you can’t just pop up a wind turbine or lay out some solar panels. Geography matters. Renewable energy requires favorable conditions, creating a linkage between energy security and physical locations that could result in future military threats. Taking action to prevent wars over renewable resources starts with experience, which is in short supply. However, the conflict in Ukraine offers some early insights, even if there is a slight a mismatch of circumstances.
Location, Location, Location
There’s no doubt that renewable energy will shape the global energy mix over the coming decades. We won’t be able to achieve IPCC emissions reduction targets without a mix of renewable sources. A wide range of factors could impede progress, from the economic security of extractive resources exporters to a shortage of high-quality green investment alternatives to entrenched large fossil fuel companies. However, those are likely more manageable than what could be the most significant barrier: Geography. Wind and solar require specific characteristics, as do geothermal and hydro. The connection between certain regions and favorable renewable energy characteristic entails a natural scarcity of renewable energy production, simply because some locations better than others.
The relative scarcity of regions favorable to renewable energy production could cause some to become contested, in much the same way that fossil fuel producing regions have been. Wind power illustrates the issues associated with geography that shrink the amount of viable wind power production location and creates scarcity, which could ultimately lead to shortages and thus conflict. Wind requires space – a lot of it, with a 200-megawatt facility potentially occupying 13 square miles. Sheer space isn’t enough, though. Wind farms need a lot of space in the right place. They need to be close to sources of demand, reasonably unobtrusive for trade and aesthetic purposes, and in jurisdictions familiar enough with the technology. Further, wind farms require conditions that make sense, to include target average wind speeds enabled by “nonforested, ice-free, nonurban areas.”
Plenty of locations around the world meet the criteria necessary for wind power generation suitability, but they remain reasonably scarce – with similar situations for other renewable energy sources. It’s not inconceivable, therefore, that access to optimal renewable energy areas could become an international security issue, particularly for countries that see renewable energy as a contributor to energy independence, rather than just as a way to manage climate risk, as Ukraine and Taiwan do. The need to protect land favorable to renewable energy production takes the notion of energy security into the realm of military security, as well. Such areas could be exposed to threats from adversaries seeking either to destabilize through disruption of energy production or simply take control of renewable energy capabilities.
The truism that wars are fought over oil may not be broad enough. A successful energy transition could mean that wars will be fought over wind and other renewable natural resources, as long as there is a strong geographical connection. And while we aren’t seeing wars fought for wind yet, the impact of conflict on renewable energy has found early precedent. The conflict in Ukraine was not driven by strategic considerations related to geography suitable for wind and other forms of renewable energy, but it has found the part of the country with most of its wind and renewable energy capabilities.
Security Includes Recovery
Most of Ukraine’s wind power assets are located from Odesa to Luhansk and are directly exposed to the conflict. In fact, 90% of Ukraine’s wind farms sit along that stretch. Damage has already begun, with at least two turbines from different owners destroyed and more affected. The insurance tab alone for wind farms in Ukraine could exceed $800 million, a number that still could go higher. Solar power plant economic and insured losses have yet to be revealed but are expected to be significant. Although the circumstances of damage do not align perfectly with the notion of renewable resource conflict sketched out above, the current conflict in Ukraine can offer important lessons for future renewable energy security.
Foremost is the importance of post-conflict recovery and reconstruction of renewable energy assets, which may be as important as traditional defense considerations. While you wouldn’t want to leave such infrastructure exposed, no defense is perfect, and plans for rapid and cost-effective recovery are crucial, especially for facilities that may be owned by private companies based in other jurisdictions. Several factors have arisen from the impact of the conflict on renewable energy so far.
Renewable energy may be natural, but the components used to harness it are not. Energy independence is only as resilient as the sourcing of components and raw materials necessary for the likes of solar panels and wind turbine, such as cobalt, nickel, and other minerals. While the affected nation may not need to source them directly, the necessary raw materials need to be available to the manufacturer of renewable energy equipment, which could be complicated in cases where an aggressor nation is also rich in relevant resources.
In addition to raw materials, demand for renewable energy equipment could frustrate the recovery and reconstruction process. Recent supply chain challenges for renewable energy equipment resulting from the pandemic are worth noting, but they have also occurred during a period of increased demand. Wind power installations are growing rapidly, as are renewables in general. Repair demand has to compete with new installation demand, which could elongate the time needed for recovery, increasing attendant post-conflict security risks – including political, economic, and societal concerns. Developing a renewable energy mix that includes faster and less expensive restoration of service can reduce that risk, as evidenced by the possibility of having solar facilities installed in western Ukraine by the end of the year.
Finally, the importance of predictable capital flows can’t be overstated. Recovery is fueled by cash, and conflict aftermath can involve plenty of competing interests. A quick scan of the Kyiv School of Economics assessment of the implications of the conflict so far provides an indication of the potential cost. The process of post-conflict remediation is further frustrated by the fact foreign aid tends to be negotiated during and after a conflict – i.e., during a period of peak need. Securing resources can be a volatile process, with distribution compounding that volatility. The fact that the wind farms in Ukraine are insured offers an additional lesson for renewable energy security. Pre-negotiated terms should result in higher-velocity capital with increased certainty of use. The wind farms have greater predictability of capital flow because of their insurance, which should factor into future considerations of the economic aspects of renewable energy security.
Conclusion
Energy transition should entail a security transition, as well. Moving from fossil fuels to renewables may lessen demand for the former and the attendant risk of conflict from resource competition, but that does not mean the risk of energy-related conflict will subside. Air and sunshine may seem to be everywhere, but some parts of the world are more favorable to capturing their power than others, which could form the basis for a new form of energy competition – one particularly suited to the age of renewable energy.
To keep pace with the evolving nature of energy security, plans should adapt to the specific nature of the assets involved. Beyond the basic tenets of protecting critical national infrastructure, special attention should be paid to reconstruction and recovery. Already, the conflict in Ukraine has yielded new insights that could become important inputs into refreshed national energy strategies, from sourcing input raw materials to financing post-conflict recovery. With renewable energy set to become an increasingly important part of the global energy mix over the next 30 years, absorbing and implementing the lessons from the effects of the Ukraine conflict on wind and solar farms will be fundamental to energy security throughout the transition.
The author is head of PCS. The views expressed herein are those of the author, based on research conducted by the author, and may not necessarily represent the views of others, unless otherwise noted. PCS, a Verisk business, generally provides data and analytics to the global re/insurance and ILS markets. PCS captures reported loss information on certain events, which encompasses, on average, approximately 70% of the market. Any reference to industry-wide is based on this research and the author’s view of trends in the industry and does not necessarily represent the view(s) of others in the industry.
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