Energy security and energy sustainability do not always make the most comfortable of bedfellows. Concerns over sufficient oil and gas, stemming partly from the Russian invasion of Ukraine, have raised questions over the pace, cost and practicality of climate goals. But for the Paris-based IEA—the global energy authority—security of supply, environmental sustainability and increased energy cooperation around the world make up its triple-headed mission. Hydrogen Economist sat down at the IEA’s headquarters with its executive director, Fatih Birol, to discuss the big energy issues facing the world.

How has the IEA’s mission evolved from a focus on energy security to a focus also on energy sustainability?

Birol: Energy security is still a very important issue. We have seen this recently when Russia invaded Ukraine. We are going through the first global energy crisis, and through that we have understood how important it is to secure energy. Before the Ukraine war we had the Covid pandemic, and through that we understood how important it is to have a secure electric power system.

“Our mission is to ensure an orderly energy transition. We will still need oil, gas and coal for some time to come, but their share needs to come down”

But we also have another crisis, which is the climate crisis, and energy is at the heart of it because 80pc of the emissions causing climate change come from the energy sector. So, if we want to have a planet that is more or less like it is today in the future, we have to transform the energy sector; and what we are trying to do is to push more clean energy sources in a secure and affordable way.

There is one area where energy security and energy transition have merged together, which is the security of critical minerals and clean energy technology manufacturing. This is an emerging topic for the IEA and ranges from the limits of critical minerals to diversification of the clean energy technology manufacturing from one single country to many others.

Energy storage seems to fit awkwardly into the security and sustainability nexus. How do we reconcile the need for energy buffers, which largely are possible due to fossil fuels, with a shift to cleaner energy?

Birol: It is an important issue because we want to have a transition to clean energy, but we want it to be orderly. We should not be dreaming of tomorrow, saying ‘we do not need any more oil’ or ‘we do not need any more natural gas’. We still need them, but their share—their contribution to the global energy system—needs to slow down if we want to reach our climate goals.

You cannot on one hand wish to have more oil and gas and at the same time reach our climate goals. This does not work. We have to have an orderly transition. We do not want to see energy security jeopardised, and therefore we have to substantially reduce the share of oil, gas and coal. But if they are compensated with clean energy sources, we cannot afford to have another energy crisis because of a lack of energy. One critical issue for increasing the share of renewables—in terms of energy security—is ensuring sufficient electricity storage. Our mission is to ensure an orderly energy transition.

We will still need oil, gas and coal for some time to come, but their share needs to come down and be replaced more and more by clean energy sources, and a critical issue here is energy efficiency. We have to use energy much more efficiently, and some of the recent trends we are seeing in many countries are steps in the right direction.

How can developed world governments work with Africa and other developing regions and nations to harness their renewables potential and ensure a just transition?

“The amount of solar electricity generated in the entirety of sub-Saharan Africa is half that generated in Belgium”

Birol: It is critical, both in terms of an energy transition and to have it work in a fair and equitable way. I give you a couple of numbers. Today in sub-Saharan Africa, one out of two people do not have electricity. This is really a major barrier for economic and social development, yet Africa has the richest source of solar potential: about 40pc of the good solar radiation in the world is in sub-Saharan Africa. However, the amount of solar electricity generated in the entirety of sub-Saharan Africa is half that generated in Belgium. Now think of the global map: how big is sub-Saharan Africa compared with Belgium? This is a tragic situation.

It is, in my view, in the interest of everybody in the world who wants to have a fair and equitable situation to make sure the sub-Saharan African countries and other developing nations have access to investment for clean energy. If everything is left to markets, those countries will have major difficulties getting financing for clean energy investment. It can be solar. It can be wind. It can be other energy sources. It is a job for—and the responsibility in my view of—the advanced economies to support developing countries either directly or through development banks.

How important is it to combine industrial and green strategies, and do the US Inflation Reduction Act (IRA) and the EU Green Deal go far enough on this? How much of a risk is there that these strategies become protectionist by promoting local content and hampering the development of the global green tech trade?

Birol: The IRA in my view is the single-largest climate action since the Paris Agreement in 2015, because the US is the largest economy in the world. And we have seen everybody has been criticising the US for not making a major push in terms of climate change, and this support in terms of incentives, tax reliefs and subsidies to push clean energy sources is extremely important.

Having said that, those subsidies in the US and all similar proposals in Europe should not be an obstacle for free trade around the world. But when I look at the future, I see that clean energy technology manufacturing is the next chapter of the industry in general and there will be competition between the US, Europe, China, India and other countries—and I hope this competition may help bring the cost of clean technologies down and be beneficial for everybody. To protect your own economy in a purely selfish way would not be of benefit in the fight against climate change. What I hope is that money should be used to bring the cost of cleaner technology down, making it accessible and affordable for the rest of the population—and the best way to do it is to be aligned with international free trade rules.

To what extent are we already in a green arms race. And if we are, is that beneficial or detrimental to the global transition?

Birol: Today, clean or green energy technology is dominated by one single country: China. China has taken the lead on clean technology manufacturing processes for decades. And as a result, they have a huge share: some 75pc of the batteries in the world are manufactured in China and more than 80pc of solar panels, as well as electric cars and other technologies.

“Clean or green energy technology is dominated by one single country: China”

By doing this, China has brought the costs of this technology down and done a service to the world. But relying on one single country—whichever country this is—is always a risky business. We have seen in Europe that overreliance on Russian energy caused a lot of pain in the European economy and for the European people. If other countries—such as the US, Europe or India—put money into clean energy technology manufacturing, we will diversify clean energy technology manufacturing away from one single country to many countries. I hope this manufacturing will be made in a way that will help further bring cost downs and that there is healthy competition. Competition in clean energy technology manufacturing would benefit the entire world. This is my hope.

To what extent does the transition demand a new approach to energy, geopolitics and foreign policy?

Birol: Energy and geopolitics have always been interwoven, but I have never seen them so closely interwoven as they are now. It is something I really do not like. I would like to see energy as a business, as a part of the economy, and unfortunately it is that energy starts where geopolitics finishes and vice versa. I hope countries see energy as a pillar of the economy, as a means of a better and more comfortable life for their people. But I am afraid there is a tendency now that energy is becoming a political weapon in certain contexts, and I hope the clean energy transition will provide an opportunity to reduce those geopolitical risks. And we come back to the same point: that energy security is important and, I am afraid, will be important for years to come.

To what extent do you find the term ‘energy trilemma’ helpful? Does it help frame the challenge between sustainability, security and affordability—and the tensions between these three factors?

Birol: These three pressure points were always and will always be there for many years to come. It is nothing new. But since those challenges are so big—climate change, the cost of energy and energy security—and since the tensions are getting much stronger, there is a growing role for public bodies and governments to find smart trade-offs between those three pressure points by developing relevant policies. These pressure points will be with us for many years to come, and market principles are of course very important for a healthy energy economy, but there will be a growing role for government policies.

Can fossil fuels be part of any long-term solution? What about the tensions regionally or between energy sources, as a transition from one fuel to another depends on where you stand?

“We in the IEA have no problems with any source of fuels. Our problems are with emissions. Energy is good, but emissions are bad”

Birol: We in the IEA have no problems with any source of fuels. Our problems are with emissions. Energy is good, but emissions are bad. If we can use these fossil fuels in an emissions-free way, such as making CCS part of our energy system, and if we can abate the emissions of the fossil fuels, then there is no problem. But I am not seeing from the major energy companies and energy-exporting countries sufficient effort to make CCS a key part of the energy mix when I look at the amount of money going to the technology. Today, compared with other technologies, CCS receives very limited funding, and I wish energy companies and energy-exporting countries would put more resources into it. Tackling emissions can be carried out in different ways. For example, we may look at how much money the oil and gas companies have made per year in the last few years. In 2022, their revenues jumped to $4tn, a level we have never seen before, and I very much hoped this huge increase in revenues would go to clean energy technologies to finance them, especially in developing countries. But this is not a trend we are seeing today, unfortunately.

There is a job for governments to see what they do with these major oil and gas revenues. Some of them are thinking of taxing, some of them of using other incentives, but I should also make something clear that, when we talk about this $4tn, people only think of IOCs. Yes, they are making handsome revenues, but c.85pc of this $4tn is accounted for by the NOCs in the Middle East, Asia and Latin America. Our eyes should on not be only the IOCs, but also the NOCs. They have to prove they are really part of the clean energy transition not only with words, but also with actions and the money they spend. 

Can energy solutions to net zero end up as energy problems?

Birol: The beauty or the challenge of the energy situation is very complex. Let us take the example of electric cars. Their share is increasing significantly from day to day, never mind year to year. In the big markets—such as China, Europe and the US—every second car sold by 2030 will be electric.

This has three consequences. First, it impacts electricity supply. If you build a lot of electric cars, you have to supply electricity, so you have to first of all build significant amounts of additional electricity generation capacity, and if we want a benefit for the climate then this should be clean energy. 

Second, it is going to require a lot of critical minerals, such as lithium and others. We have to make sure critical minerals are available. Investments should come on time to avoid a bottleneck in the market so that prices go up. Third, for the oil industry, the increasing number of electric cars—and then buses and trucks—coming online has implications for oil demand around the world. If I ran a company, in addition to looking at the productivity of my oilfields and my oil investment, I would keep a good eye on the electrification of the transportation sector, because this makes up the lion's share of oil demand today. So, one must watch these three things at the same time.

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Author: Paul Hickin, <BR>Editor-in-chief