The Clean Energy Edge Is Becoming Clearer As a Result Of The Iran War

Beyond a death toll in the thousands, the war in Iran has a big ripple effect: the more oil-dependent nations are getting squeezed more than ever due to the closure of the Strait of Hormuz, illustrating the advantage for those relying more on clean energy.

As oil hovers around $100 per barrel, countries like China, Pakistan and Nordic nations are using diversified energy sources as a security asset. In contrast, countries in Southeast Asia, the U.K. and the U.S. are feeling a more immediate squeeze.

With uncertainty surrounding the U.S.-Iran ceasefire, the economic impact of the closure of the Strait of Hormuz continues to escalate. “As the saying goes, prices go up like a rocket, but they come down like a feather,” said Wesley Herche, director of energy and sustainability solutions at the world’s largest logistics real estate company Prologis and co-founder of the Sustainability Decoded newsletter.

Just last year, investments in renewables outpaced fossil fuels two to one, added Herche, who is also the former sustainability lead at Amazon and former intelligence officer for the U.S. National Geospatial-Intelligence Agency. “It wasn’t because of climate policy, but because of economics, technology and energy security. Renewables aren’t a panacea that completely absolves you of any impact from geopolitical activity, but having alternatives gives you a natural hedge.”

Grid-resilient tech as diversification, not just a climate solution

As the U.S. started the war against Iran, global clean energy investment hit a record $2.3 trillion.

China, for instance, is growing its renewable presence with more than half of all new car sales going to the EV market and 42 percent of its electricity generation coming from clean energy. As a result, it consumes about one-third less barrels of oil per day than the U.S., despite having a larger population and comparable GDP. Also, its 1.3 billion barrels of oil in reserve far exceeds the roughly 400 million barrels in the U.S.

In Pakistan, energy resilience came from the bottom up. Over the last few years, residents have worked to install solar on homes and shops, ultimately becoming the third-largest solar panels importer in the world. The population installed enough solar panels to power half the national grid in a single year.

“I call it the Jugaad energy revolution,” said Herche, referring to the Hindi and Urdu word meaning scrappy and resourceful. “They’re still suffering, to be clear,” he said. “So is most of the world, but it is starting to have a much more strategic impact.”

Meanwhile, in the U.S., a net exporter of petroleum products like gasoline, diesel and jet fuel but a net importer of crude oil, reserves are shrinking, gas prices have swelled more than 30 percent year over year and nitrogen-based fertilizer is squeezing the farming industry. About a third of the world’s fertilizer, a fossil fuel product, travels through the Strait of Hormuz.

“The world has no replacement for nitrogen fertilizers,” said Maksim Sonin, an energy executive who works with Stanford University’s Center for Fuels of the Future, the Stanford Hydrogen Initiative and the Energy Institute in the U.K. “The current situation made it even more clear what the priorities are and how much energy security and food security really matter.”

In places like Southeast Asia, which account for most of the imports coming from the Strait of Hormuz, the energy crisis is more dire. Philippine President Ferdinand Marcos Jr. declared a national energy emergency in late March due to “the availability and stability of the country’s energy supply.” South Korea continues its nationwide energy-saving campaign calling for more bicycle trips and reduced showers. In the U.K., which heats around 70 percent of homes and generates 30 percent of overall electricity from gas-fired power plants, existing inflationary pressures are only getting worse.

As nations catch up to the reality of the need for energy security, renewable energy industries are seeing preparation for a looming boom. In the first three weeks after the war began, Octopus Energy in the U.K. saw a 50-percent surge in solar panel sales and a 30-percent jump in heat pump demand.

“Conflict is never positive, but every time a crisis like this happens, either because of wars or a pandemic or global supply chains, it’s a wake-up call that countries have to move for energy independence,” said Daniel Domingues, founder & CEO of Planno, an AI platform that helps solar energy companies find commercial and industrial clients using satellite imagery data.

Domingues says any crisis that causes oil costs to balloon inevitably leads to increases in renewable energy investments from institutions. “Solar is a savings,” he said. “Saving is not a priority, but when electricity prices go up, that’s where they care the most, because the budget is ruined.”

Countries like Spain and Belgium have documented this historical trend, which boosted after the 2008 financial crisis, 2020 pandemic and supply chain crisis and 2022 Russian invasion of Ukraine.

What’s different this time, though, is that renewable energy sources are broadly seen as more reliable. “The oil and gas lobby tells us that solar and wind are not reliable sources because they’re not there all the time. The sun does not shine at night,” said Domingues. “Recently, I’ve been seeing a lot of the opposite. The sun still shines, wind still blows. We have a problem with reliability on gas now.”

Even as renewable energy investments are poised to accelerate, there will inevitably be a lagging period. “In energy, things take time,” said Sonin. “When we build an industrial plant, we build it to last for 20-plus years, and those are billions in investments. But I’m glad there is momentum, there is a vector, and we’re moving towards it.”

Despite this, AI—a notoriously hungry energy user—is also a breakthrough creator, added Sonin. “AI helps us come up with new breakthroughs and commercialize faster,” he said. In other words, as nations around the world grapple with the decisions they have (or haven’t) made with renewable energy, the alternatives to fossil fuel are only going to grow.