Energy Independence Through Renewable Resources: Potential for Localized Power Grids?
The world is witnessing a significant shift in the energy sector, with renewable energy starting to outpace demand growth in the Indian Ocean, a development that could prove pivotal. According to the International Energy Agency (IEA), energy demand is indeed growing and shifting southward.
This transition to renewable energy, however, presents a paradoxical situation. While global energy demand may be growing, the trade volumes of energy sources could be decreasing. Electricity, the primary carrier for most renewable energies, faces long-distance losses in transportation.
Solar and wind energy, being free goods essentially available everywhere, could lead to a regionalization of trade. Cross-border energy flows would shift from global trade in energy sources to regional trade in energy carriers. This shift is likely to change the geography of trade from current material suppliers to countries possessing critical materials for clean energy technologies, such as China, Brazil, Chile, and Congo.
The nature of trade in renewable energy generation technologies could determine whether trade remains global or becomes more local. Hydrogen, while a more long-distance carrier, can be produced domestically, adding another layer of complexity to the shifting trade landscape.
The intermittent nature of renewable energy requires flexibility, increasing the need for short-term, intraday markets and cooperation with neighbouring countries to balance grids. This could potentially affect the strategic importance of existing trade routes from and to OPEC countries.
Renewable energy significantly reduces the volume of energy sources shipped globally. Renewable energy generation technologies are more modular and scalable than their fossil counterparts, leading to a change in the nature of trade. Instead of shipping components to build a single power plant, renewable energy trade involves trading many solar panels to various actors.
Critical materials used in clean energy technologies, such as copper, cobalt, lithium, neo dysprosium, and neodymium, represent new trade flows. The issue of 'stranded trade', especially in terms of volume, warrants a closer look during the transition to renewable energy.
Dr. Daniel Scholten, an Assistant Professor at Delft University of Technology and a non-resident fellow at the Payne Institute, Colorado School of Mines, and Just Voskuyl, a graduate student at Delft University of Technology, studying Complex System Engineering and Management, are at the forefront of studying these shifts.
Countries like India, Australia, Germany/France, Spain/Portugal, and Argentina are expected to become significant exporters of hydrogen and electricity in regional markets as renewable energy adoption advances. India aims to be a major global hub for green hydrogen export by 2030, Australia is developing green hydrogen projects with exports anticipated from 2029, Germany and France are advancing hydrogen infrastructure and supply chains in Europe, and Argentina is promoting hydrogen industry investments and exports.
The role of hydrogen in this regionalization of trade is yet unclear, adding another intriguing dimension to the evolving energy landscape.
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