How renewable energy shields countries from oil shocks

How renewable energy shields countries from oil shocks

The ongoing conflict in Iran has thrown global oil and gas markets into disarray, sending energy prices soaring. Analysts highlight that a rapid expansion of domestic renewable sources is key to mitigating future crises. Nations utilizing greater renewable energy in their power systems are less exposed to global price fluctuations, experts claim, as tensions in the Middle East disrupt supply chains and raise geopolitical risks.

Since the US and Israel initiated attacks on Iran over a decade ago, critical infrastructure in the region has faced significant damage. The potential for Iranian retaliation has effectively closed the Strait of Hormuz, a vital artery for 20% of the world’s oil and gas. This bottleneck threatens to limit fuel availability for countries reliant on it for electricity, heating, industry, and transport, exacerbating inflationary pressures globally.

“Energy is the lifeblood of our societies and our industries,” stated Antony Froggatt, an aviation, shipping, and energy specialist at the Brussels-based NGO Transport & Environment. “Yet we remain heavily dependent on fossil fuels.”

Approximately 80% of the world’s primary energy still comes from fossil fuels, the leading source of greenhouse gas emissions driving climate change. This reliance leaves economies vulnerable to geopolitical shocks, according to Rana Adib, executive secretary of REN21. Countries with robust domestic renewable energy portfolios demonstrate increased resilience to such disruptions.

Green technologies like wind turbines, solar panels, and batteries depend on global supply chains, including rare earth minerals. However, the energy they generate is sourced locally, as Adib explained to DW. “Once you deploy the technology within a country, the fuel becomes sunlight, wind, and local heat,” she noted. “This explains why renewable energy offers a more stable alternative to fossil fuel dependence.”

Uruguay’s commitment to renewables began over two decades ago, driven by concerns over oil import reliance following the 2008 financial crisis. The nation, with a population of 3.5 million, aggressively expanded wind farms to replace fossil fuels in its power grid. Today, more than 90% of its electricity derives from renewables—primarily wind, solar, hydropower, and biofuels. In particularly wet and windy years, this figure surpasses 98%.

Adib emphasized that Uruguay achieved this without needing vast energy storage solutions. “This proves a fully renewable electricity grid is achievable,” she said. “It means inflationary impacts are less severe, as energy prices remain stable even during global shortages.” The country has saved $500 million annually in import costs and created 50,000 jobs through the transition.

Despite progress, Uruguay still depends on fossil fuels for transport and industry. It aims to electrify public transit and decarbonize manufacturing, though full fossil fuel elimination may take several decades. Similarly, Denmark, which faced severe energy shocks during the 1970s oil crisis, has since made wind power a cornerstone of its energy strategy. Over 60% of its electricity now comes from wind, with biogas as a secondary source. The nation targets a fossil-free electricity system by 2030, and its district heating network plans to use 100% renewable biomethane in the same timeframe.