Who is the Speedy Gonzales of Green Energy?
For the past few years, many investors as well as the public are increasingly lured by the idea of a greener and more sustainable world. Global warming has a major effect on this shift. Right now, regulators from all over the world are trying to incentivize companies to start polluting less. In addition to this, the idea of green and sustainable energy is now attractive as never before. This article will try to explore what countries might be the winners in this fossil-free world.
To identify the winners in this race, we first have to understand what characteristics would make one country succeed and another one fail at this competition for dominance in a clean energy world. The first thing to mention is technology. The production of green energy can not only sustain an entire country but can also be exported to other less fortunate parts of the world. However, it requires an enormous amount of R&D spending, since the technology used now is a long way away from the ideal when it comes to efficiency. Furthermore, even though for some people it seems like renewable energy can be generated by anyone, it still requires the use of natural factors such as wind, sunlight, etc. The final factor is how much countries rely on fossil as of today. For countries that already rely on it too much, the transition is going to be more expensive.
First of all, to identify the countries which have the most to lose from the transition to green energy, we have to look at the composition of GDP of different countries and fossil fuel rents as a percentage of it. For example, Libya and Iraq have around 40% of their GDP coming from fossil fuel rents. This generates an enormous exposure to fossil fuels. The world’s transition to renewable energy will create a detrimental impact on countries like Libya and Iraq. Nevertheless, the transition can be much easier for countries with a high GDP per capita, despite their reliance on fossil fuels. High GDP per capita can be an indicator of the resilience to changes in the energy market as well as the ability to adapt to a new environment. For example, around 35% of Saudi Arabia’s GDP comes from oil rents, but its high GDP per capita allows it to also make major investments into renewable energy. Saudi Arabia is planning to have around 12-14% of its energy supply coming from solar power.
Without a doubt, it can be said that so far China is winning this race in almost every category. China has an enormous spending on renewable energy, it spends around 0.9% of its GDP on renewable energy. For instance, 7 out of 10 of the largest solar power producers globally are Chinese companies. In addition to this, China controls important materials required for production of batteries and cables, such as cobalt and some other rare minerals. Finally, China also produces around 50% of the world’s electrical vehicles and around half of the world’s wind power. Taking all of this into account, it is clear that China is dominating in the renewable energy industry as of today, and it continues to invest extensively to maintain this advantage in the future.
Unlike China, some countries are trying to capitalize not on the production of energy but on the ability to transport it. For example, Norway is building the largest subsea electrical cable. This will be Norway’s seventh inter-connector, allowing the country to export its hydropower energy. The ability to export electricity will be incredibly important in the near future since energy will have to be transported from the countries where it is generated to the countries where it will be consumed.
To sum up, it is incredibly hard to identify which countries will benefit the most from the transition to green energy, as a lot of factors must be taken into account. Nevertheless, it can be certainly said that this race for dominance in a green energy world has already started. Different countries try to capitalize in different technologies and ways to produce as well as export. And even though some countries like China are already far ahead in terms of the progress, the race is far from being over.
Written by Dima Kurgan