Identifying undercurrents and early weak signs of trends is the most important for any valuable forecast. So many things have been said about oil and gas prices, challenges of investment in energy infrastructure and basic geopolitical risks such as the war itself. However, there is a tangible and strengthening trend, where political reality, world politics and societal needs are slowly growing together. This is the prosumer phenomenon.
Producing and consuming energy at the same place: possibly in the same building, or piece of land, apartment bloc of a city, or industrial domain. Scale it up, still valid: in the same country, at the national level and also remains true for geopolitical blocs, at least at the level of political will for the time being. We want to be able to produce energy from nuclear, renewables and possibly a mix of fossil fuels, mostly gas, under our control.
The trend is evident from the perspective of energy security and the nature of the green transition. Localised small producers of renewable energy are on the rise and you can also think of other stuff than the usual solar panels on the rooftop: look at the Dutch government’s idea of making heat pumps mandatory in residential buildings.
The horizontal needs are also there and growing. 2023 will be a year when we learn further lessons about the impossibility to defend critical infrastructures under the current threat landscape, with the current level of security investment. In other words, the asymmetric attacks (for example, cheap for the attacker, costly for the defender) are on the rise and will keep increasing, partly due to the Russian position in Ukraine, but also in the geopolitical competition between China and the West, as well as it is an easy target for hackers of Iran, North-Korea and for larger cybercriminal groups.
So local resilience, including local storage and production of electricity and redundancy in the energy infrastructure will be on the rise, in perfect parallel with the climate change mindset. This latter is the major theme of the upcoming wave of the younger electorates all across Europe, not restricted to Green parties anymore.
This year will sadly demonstrate that the pockets of EU Member States are not bottomless. While the bloc should pay 4-6 times higher gas prices to cover running needs, it should at the same time invest in the future infrastructure of green energy. This all happens in the shadow of heavily state-subsidised similar industries in China and by now in the US, as the Inflation Reduction Act enters into force. It will be a painful debate among the two rich capitals, Berlin and Paris and the rest of the EU, how to manage state aid and subsidies at the national level and for what can the EU level account for (only hijacking RePowerEU money or finding new resources?).
This is against the backdrop of the threat of attacks on critical infrastructure. Communication cables (of the German railway), gas pipelines (recently in Lithuania) and deep sea internet cables have been already under attack by hostile third States’ operations. We might well enter the era when state-funded terrorism is resurrected by malign actors such as Russia. Energy infrastructures are an evident target. Add on top of that the brewing scene of green radicalism, potentially penetrated by hostile actors in the future, hijacking noble objectives with the hostile national interest.
Whether supply chains can keep up with the specific demands of the energy transition remains to be seen. Not only critical raw materials are needed, but think of chips to run the hardware, think of simply diesel and AdBlue, or steel or any other element that is produced or processed in an energy-intensive way.
Finally, let’s start facing climate change and its across-the-horizon effects. Water scarcity is impacting shipping routes, ports at river deltas, cooling of nuclear power plants, the intensity of mining of certain materials (or the suspension of it!) and we could go on and on. Not to mention the resilience of energy infrastructure against extreme weather events, as we see more and more in Europe, but already taking a heavy toll on the US.
The geopolitics of energy will remain highly dynamic in 2023 with the Middle East in turmoil (new government in Israel, protests in Iran, war in Syria ongoing), China’s energy appetite coming back latest in the third quarter, while the debate around nuclear is taking another slow turn in Europe.
This is clearly the era of polycrisis, multiple crises happening at the same time and what’s even worse, influencing each other in unpredictable ways. So look at weak signals ahead and keep the belts fastened.
