The New Energy Geopolitics

with Morgan Bazilian 16 September 2021 | Podcast
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For nearly a century, fossil fuels have been a key source of geopolitical tension. How is international politics changing with the surge in renewables? Join us in this fascinating conversation with Morgan Bazilian, Professor at the Colorado School of Mines and Director of the Payne Institute.

Åsa Borssén:
“All warfare is based on deception: the supreme art of war is to subdue the enemy without fighting.” These words from Chinese war strategist Sun Tsu resonate today as we consider the geopolitical implications of the current energy transition. I’m your host Åsa Borssén and this is Highgrade.

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Åsa Borssén:
Welcome to The Natural Resources Podcast. My guest today is a global specialist in energy security and geopolitics. Following a long career at the World Bank, Morgan Bazilian has now embraced the academia as Professor at the Colorado School of Mines and Director of the Payne Institute. Morgan, thank you for joining me.

Morgan Bazilian:
It’s my pleasure, Åsa, thanks for having me on the podcast.

Åsa Borssén:
The way in which public opinion forms has changed dramatically. Social media can now shift public believes almost instantaneously. How can the deep and slow nature of academia compete with that?

Morgan Bazilian:
That’s a great question. I think academics are still struggling with that, or I’m sure they are. Because it takes them so long to think about things and the timeframes, you know, especially in research are on the order of three to five years. And so one thing to say is, academics, the strength is, is very rarely in communications, right? And so translating detailed science, whether it’s physical science, or social science, or analytics into understandable and interesting chunks for public dissemination has never been the strength of the Academy. I’m not sure it ever will be. But that’s a terrific question and how, you know, certainly you can see some academics who have made the transition to say Twitter, especially, as a means to get out messages, it certainly remains a really interesting way to get out, you know, papers and things like that. But those remain largely unread, of course, academic journal articles. So it’s still a skill set and a challenge that I think is, is a really important one and hasn’t been fully addressed yet.

Åsa Borssén:
Most of your work revolves around energy and energy security. When did you realise that this was going to be your field?

Morgan Bazilian:
You know, I’ve been fairly limited in the areas I’ve worked, which is sort of common in academia, not as common in public service. So I finished my PhD, which is most closely related to Applied Physics, and immediately went into the policy space. So I was, like so many other people, faking it. So you know, I understand, I understood the fundamentals from a technical side, but had very little understanding of the complex interactions of, you know, society and economics and politics, etc. And I didn’t really plan it in any conscious way. So I moved from my PhD into markets and then moved to working in Ireland for many years, but starting with helping them stand up, what is now their National Energy Agency, and looking across the energy landscape on an island nation, I very quickly came to the thought that, you know, aspects of energy security, especially were incredibly important for the economy, as well as the sort of livelihoods of the island and started working in that quite a lot. About 20 years ago now.

Åsa Borssén:
Let’s look a little bit more specific into the energy transition. You grew up in a world where energy was synonymous with fossil fuels – to what extent has that change today?

Morgan Bazilian:
The energy system is certainly changing. Now, my doctoral work was in photovoltaics. So solar energy. So I guess I had the familiarity with what were then called sort of alternative technologies or new technologies. Okay, I’m not that old, I’m not talking about the 1950s. But certainly, there was very low percentages of these things in the energy mix, aside from hydro, of course, but already then it seemed apparent to me that they were going to grow rapidly. Now, okay, albeit from a very small base. And, of course, we didn’t call it a transition back then, when I was starting. But we did look at sort of the portfolio of technologies and systems that would meet demand with the need for health and safety. And so it wasn’t just climate change, but air pollution, which is a really strong driver, probably a much stronger driver for change than climate change is. In about 2008, I wrote a book about some of the analytical techniques, looking at diversity and security of supply across a range of technologies. And of course, that included wind and solar. And while I was working in Ireland, we helped, you know, really put Ireland on a path to be one of the big players in renewable energy, specifically wind energy, in the world, and so how we think of energy transitions now is rooted in some of those earlier attempts to bring large-scale wind onto the system. And the various challenges and also just hesitancy that you still see. But that we worked through from a policy and a technical perspective, even back, you know, 15 years ago.

Åsa Borssén:
And you mentioned that we didn’t talk about an ‘energy transition’ in the beginning, but when did we start using that terminology?

Morgan Bazilian:
You know, as you asked the question about energy transition, I’m not sure. But the, you know, it certainly has taken over the lexicon at this stage. And it feels fairly recent to me. And, of course, it’s still a loaded term for some parts of the energy sector, you know, and some people would still argue, I guess, rightly, that, you know, the energy system has always been in flux, there’s, there’s always some transition. And then there’s others who like to use different vocabulary and say, well, we’re not transitioning, we’re just growing or switching. I’m not sure the vocabulary itself on that piece is so important. As long as there’s some understanding that it’s, it’s changing, and it seems to be changing more rapidly than in the past and in a certain direction of travel.

Åsa Borssén:
Electric cars are, of course, an important part of that energy transition narrative right now. And some people claim that this is basically greenwashing as most electric cars are still fuelled by coal plants. What do you say? Is there truth to that claim?

Morgan Bazilian:
Yeah, the sort of claims about electric vehicles being more intensive from an emissions perspective, or environmental damage, then an ICE car, an internal combustion engine, are largely garbage. And, you know, they’re mostly communications and talking points for certain advocacy groups. In general, the sciences around lifecycle emissions and lifecycle analysis has, has been, you know, like you indicated, and one of your earlier questions has been one of the areas, most often used in sort of poorly communicated ways. And so the EV’s have suffered from that, just like, years ago, solar energy suffered from the same thing in certain small, sort of wonky communities. So that particular narrative, I think, is pretty tired and not very robust. Of course, there are challenges though, and so we don’t want to say they’re not challenges with a nonlinear growth in electric vehicles. Those challenges have to do with everything from, you know, business models to how power systems are designed and operated, to the minerals and metals that go into the production of these things. But, you know, the challenges are significant, but that particular one is, you know, in my view, sort of a red herring.

Åsa Borssén:
Do you drive an electric vehicle?

Morgan Bazilian:
No, I don’t.

Åsa Borssén:
And why is that?

Morgan Bazilian:
I guess I don’t have any great reason for it. It’s, you know, I make a decision about the vehicles that my family drives based on mostly economics and sort of secondary on the environment, and usually buy used vehicles. And so I guess I’ve been waiting for the electric vehicle used market to become more vibrant. And the options become more interesting to me, I really like the idea of getting one of those Ford F-150, the electric ones. In Colorado that has a certain attractiveness. They’re not quite available, and they’re still a little bit expensive. So I’m, I’m sort of waiting for one of those unless Ford wants to send me one, of course.

Åsa Borssén:
Ford, if you’re listening, you know what to do.

Morgan Bazilian:
That’s right.

Åsa Borssén:
In this energy transition, many nations are pledging to become carbon neutral in a relatively short timeframe, for example, the UK in 2050. Are those pledges realistic?

Morgan Bazilian:
There are many countries over the last, especially over the last year or so, who have made net zero by the middle of the century pledges. So that’s across Europe, the United States now under the Biden administration, and China and Korea and Japan, and they were coming out one a week for a while. I think that’s good news. There’s enough, obviously, political freedom to make those kinds of high-level goals. A couple of years ago, I wrote a scenario paper where we looked at the future of energy system transitions out to 2100. And of course, you know, the first thing we did when we did that scenario exercise was to say, we have no idea what’s going to happen in 2100. But here are four very different scenarios of how it could play out vis-à-vis technologies. So renewables or fossil fuels. And three lessons or three insights emerge from that exercise, which we did for the German Government for the Ministry of Foreign Affairs, as they were looking at how the geopolitics of this might play out. And one of those insights is relevant to your question about net zero goals and how realistic or otherwise they are. And it said, something like, we should shift focus from goals to pathways. And what that means is that it’s relatively politically expedient or easy relatively to put out a goal that is decades away, where the particular political parties or politicians themselves won’t be around or, you know, literally might not be around it. But it’s much more difficult to do the messy work of implementing and putting detailed policies is short term together. But if we could shift to those detailed policies, and budgets that will get us there. It’s much more powerful. And so where you see countries actually putting into together that legislation, you can see that it’s extremely tough from a political perspective. The Irish government actually just put out, I think, one of the boldest, detailed pieces of legislation that took many years to get through the various political processes and is now ensconced in law. But that is not the case in most places that have these 2050 long term goals.

Åsa Borssén:
Is it sufficient?

Morgan Bazilian:
Is it sufficient to address climate change? Yes, absolutely. If you got to those goals, it’s absolutely sufficient. That’s not really the main question, though. The main question is, is it feasible? And is it going to happen? You know, I’m not terribly optimistic that that’s going to happen. You know, it’s, as you get older, of course, you know, decades don’t seem quite as long as they did when you’re young. We’re talking about 30 years to fundamentally change, not just an energy system, but the global economy and how society operates. It’s a much bigger challenge than the sound bites would allow for. I think we’re going in the right direction. In other words, there’s been good movement from both politics and technology and society. But certainly, the pace of change is nowhere near on track to meet that kind of goal.

Åsa Borssén:
China dominates the production of green technology, but it still needs the raw materials. Clean energy is creating a surge in demand for copper, lithium, manganese, rare earths and all the others. Are we facing a new mining supercycle?

Morgan Bazilian:
Let me answer that question in a slightly different way, starting with China, rather than mining super cycles. Along with the transitions to new technologies and therefore, the demand for minerals and metals, there are inevitably geopolitical tensions, right? The tensions between sovereign states between countries don’t, we don’t think go away, they just shift depending on trade and demand for certain things, including commodities. And one of those shifts is the dominance of China. China made a decision, not recently, but many years ago to play a big role in the solar energy space, right, and now has made the same decision in batteries and electric vehicles. And, you know, they are able, as a government, to make big industrial development, industrial planning decisions, without the burden of a lot of politics, or not the kind of politics that maybe we’re used to in Europe or the United States. They are way ahead in those areas as a result of this. So not a small amount ahead but way ahead.

And remember that say the United States made a similar decision in making sure that we had relationships with different countries based on oil for the last 40 years, right. So our energy security and energy foreign policy was based on oil and gas for well, you can still argue it’s still is but at least it used to be for since at least the post-World War Two period forward. And probably before that, and China made the calculation to go into solar energy when they were unable to compete with the United States on those oil market relationships. And they’ve dominated since then. That’s the US terminology, because it’s dramatic and political. But it’s also factually accurate. So you know, almost all the solar panels in the market are manufactured in China, and they’ve done a terrific job at getting costs down, as well as keeping quality up. So you know, the quality of the panels in China is excellent. Now, more recently, other things have come to light around the forced labour accusations in Xinjian, and, you know, other parts of the supply chain that are serious and need, you know, significant attention. But the thought that all of a sudden, say the United States or Europe is going to catch up and be, you know, compete in that market. Well, in the short term, it’s nonsense. It’s not gonna happen. But, you know, in the medium term it there’s possibilities for it, but only if it’s prioritised based on serious policy and budgets.

If I shift to the minerals part of the demand. So yes, I think we can assume that, and we already see a demand for these certain minerals in the energy space, from batteries to photovoltaics to certain parts of direct drive wind turbines, and things require lots of minerals. You know, the discussion, as you know, Åsa, and your listeners know, tends to focus on the mining, so the actual raw material or the rock, let’s call it of these things, the ores. I think that’s a very limited way to think about the problem because it in essence, hardly anyone is interested in the actual rocks. What you’re interested in is processed chemicals or advanced manufacturing. And the part of that supply chain, that China is dominating, the most clearly mandated part is actually not the rock part, but the advanced manufacturing part. Because advanced manufacturing produces much more value add for your economy than the rocks. And they know that, just like any economists would tell you. And so, you know, do I think that, you know, there’s a battle for raw materials. Sort of, but the, you know, just as much, you know, not without considering what you’re going to do with those raw materials.

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Åsa Borssén:
For most of last century, fossil fuels played a central role in geopolitics. How is international politics going to change with a surge in renewables? Today, I’m talking with Morgan Bazilian, Professor at the Colorado School of Mines and Director of the Payne Institute.

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Åsa Borssén:
We’ve now moved into this area of geopolitics; can international politics be a win-win? Or is it necessarily a zero-sum game?

Morgan Bazilian:
The work we did on scenario planning was for the German Government because they cared about that question. In other words, you know, does a clean future, in other words, a net-zero type of greenhouse gas future, and we looked all the way to 2100, how does that relate to geopolitics? That was the question, what we said was that these tensions don’t go away, they just shift so that it seemed very unlikely to us that even under a really clean energy future, that all of a sudden you have peace, global peace, now, it might, might be easier to attain peace in some scenarios, where you see a lot of cooperation moving towards a shared goal of a sort of existential shared challenge, like climate change. But we thought it was pretty unlikely that you would see just all winners and everything would go swimmingly, and therefore, you’re going to see tensions, and therefore you’re going to see strife between societies. And, you know, frankly, the thought that all countries would somehow align with their priority as climate change seems highly unlikely to me. So if we look across the world today, 150 of them, at least, are developing or emerging economies. In other words, not as wealthy as the OECD countries. You will find very few of those 150 countries that have climate change as a top tier priority in their governments. The priorities are fairly straightforward and intuitive, which is poverty alleviation, economic development and wealth creation, and creating more freedoms for their countries where they have democracies. And certainly the freedoms for the countries is a priority of the people whether or not it’s a priority of the government. But I would say climate change in almost all cases in those countries falls below at least those four or five priorities. And so looking at a world just through the lens of low carbon economies becomes limiting in terms of how you look at international relations.

Åsa Borssén:
And in terms of geopolitics, I mean, the fossil fuels played a central role. And some would say, were the root cause of some of the major armed conflicts even. Do you see these conflicts, major armed conflicts go away with a surge of renewables? So what type of conflict would you see, you’ve called it the new Cold War over critical minerals?

Morgan Bazilian:
Yeah, so just to note to your listeners, who don’t know this, but whenever you write a piece for a newspaper or magazine, you do not pick the title. So I did not pick that title.

Åsa Borssén:
So you wouldn’t agree with that. You don’t think we’re heading towards a Cold War?

Morgan Bazilian:
No. But the United States and China are in the midst of a very serious set of foreign policy difficulties, right. There are all kinds of issues on the table from trade to human rights. And, you know, one of them, and probably a smaller one happens to be minerals and metals, where they dominate those markets, as we talked about. But, you know, can say a move to clean energy and renewable energy, create the conditions to support peace? I think they can, in some cases, actually. But they’re very specific cases. And you can tell with my language there that I’m hedging that it’s absolutely not likely to be the main point but a supporting condition. And you know, I’ve done quite a lot of work around how energy systems, that is shared markets and infrastructure, can be the basis for peace. It doesn’t necessarily have to be clean energy in all cases. So the example I work from is Ireland. The Republic of Ireland and Northern Ireland, which is of course, part of the United Kingdom, has a long and well-known conflict. Under the 1998 peace agreement, there were a set of different topics that were to be discussed and worked on, energy was not one of them. But as it turns out, energy is one of the more successful shared markets and infrastructure pieces on the island of Ireland, where the market was successful and cleared in two different currencies. It went across borders; it was of course agnostic. To the we used to joke the colour of the electrons, whether they were orange or green, in other words, Protestant or Catholic. But it turned out to be one of the more successful efforts between the two jurisdictions that Northern Ireland in the country of Ireland. But it was not mentioned in the peace accords. And so what I have taken from that is that sometimes these technical things can sort of fly under the radar – in a good way. In other words, they’re too boring for politics in some way, but that they can actually help create trust. So we’ve looked at that issue and how it might take hold and, you know, sort of bigger conflicts if I could say that from, say, Israel and Palestine to Indians and some of its borders to Iraq and Iraqi Kurdistan and some Pakistan and India. How can energy systems like that help provide the basis for peace? And so I believe there’s useful work to do there and think about and implement.

Åsa Borssén:
So far countries needed oil to keep the lights on. What does energy security look like in a future where electric generation no longer depends on imported fuel?

Morgan Bazilian:
So the misnomer there, of course, is that oil doesn’t really keep the lights on. It keeps the cars running. But it’s an important point at least in most OECD countries, there’s not actually a fight, as it were between, say, renewable energy and oil, that fight comes with, in the electric vehicle space, not in the power system space. And so I answer that question in sort of a wonky, boring way, because it’s very hard to generalise the answer to that question. I know that that’s an academic answer. But there’s simply no way to make the energy security needs of different states homogenous, because they’re simply not. And so of course, in the United States, which, like many countries tends to be parochial about its thinking, the thoughts about energy security, can often move to what I think are wrong notions about energy independence. That’s a political play, not an actual technical or societal interest. As the world becomes more interconnected, I think what we’ll see, hopefully, in sane places that have people who are willing to think about it, and go beyond politics, which is very few places, you’ll see that an acknowledgement of this interconnectedness means that the way you get security is through good governed, transparent, liquid, well ruled trading regimes.

Åsa Borssén:
So thinking of specific risks if we move away from fossil fuels. WEF alerts of the risk of hacking into electric grids to bring the system down, so some sort of cyber terrorism. Would that become more likely and more of a threat?

Morgan Bazilian:
Yeah, and I’m going to do the annoying thing of telling you again, that it depends. Now in the future, we become more interconnected. And that is in a literal sense for, say, power systems, electricity systems, where we see more interconnection between jurisdictions and states. So that’s one vector for cyber threats that could increase, you have more trade across jurisdictions and boundaries and with the possibility that, that there are cyber threats, you know, maybe one side doesn’t take it as seriously as the other, etc. Then there’s the difference between power systems. In some economies, where you’re just trying to stand up a decent utility company, you may not have the budget, or you probably won’t have the budget, or the ability to hire in for a sophisticated cyber security group, where you do you have that in most modern utilities in, say, Europe, in the United States, Japan, etc. So there’s that dichotomy. So yes, you might see more possibilities in those emerging developing economy systems. I’ll get to why that might also not be the case. You know, we’ve seen cybersecurity now on pipelines very recently in the United States. And then some people would say, well, if you move to these sort of smart energy markets, where you have tonnes of data going in both directions, there’s a lot more possibility for cyber-attacks, because the system itself is becoming more digitalized. It also might be the case that you see less of it. So you know, it’s not clear that there’s, yes, you see lots of attempts and on hacking. And yes, you see an uptick on certain kinds of cyber-attacks across society. So not just in the energy sector. Whether the energy sector sees more or less, because of those differences is not yet clear. And it appears that there’s more defence mechanisms in place. So whether there’ll be successful or not, is also not clear. But it’s certainly a high priority and a lot of markets. And, you know, when we see stops in physical systems, like the delivery of gasoline in the United States over a long period over a week or two, and prices rising, then you know that that is going to be taken much more seriously, as it should, thnn it has in the past.

Åsa Borssén:
Despite efforts by the West, China, India continues to rely on fossil fuels. For example, last year, China commissioned more coal plants than the rest of the world decommissioned. Does this not put the West at a disadvantage?

Morgan Bazilian:
You know, as it turns out, right now, the reason coal has declined in places like the United States has very little to do with climate change regulation, and much, much more to do with either air pollution regulation or straight economics, right. So it’s simply not economically viable anymore. We have all kinds of evidence from utilities in the United States creating technology agnostic bids for capacity that is, you know, power plants – and coal can’t compete, period. The argument that, you know, coal doesn’t have a level playing field or something like this, or that, you know, renewables are getting preferential treatment right now in power systems, at least in the United States. and I think in Europe too, is generally a garbage argument. It’s just not true. You just bid for price per kilowatt hour and coal is not in the money, period.

Åsa Borssén:
To finish off, we’ve been talking about geopolitical risks and challenges and a world and an energy system in flux. But if you take off your analytical hat, how do you actually feel about the future?

Morgan Bazilian:
It’s a huge question. right. And academics are not great at huge questions. You know, I can give you a take from an energy expert perspective, where I think that I am generally optimistic about some aspects and less optimistic about others. So I’m optimistic that many governments are taking climate change seriously. I think there’s great movement, especially in solar energy and wind, as technologies. And that’s really exciting to see them make big spaces and not become, not as alternative technologies anymore, but as dominant technology. So there’s a lot of exciting things in the renewable energy space and the renewable energy markets. I think that there are mixed signals as to how those benefits are playing into justice. So equity both within OECD countries and maybe even more so outside in emerging and developing economies. We still have a billion people that don’t have access to electricity, 3 billion that cook with solid fuels. So there’s still a massive set of inequities in the world. Do I think that the world will continue to prioritise things like justice and climate change and environmental health? I think it’s moving in the right direction, but I’m not sure it’s going to remain at this level of prioritisation in certain countries for very long. And so, you know, I guess my take is that it’s a mixed bag. That’s how human societies are.

Åsa Borssén:
Morgan, thank you very much for joining us. It’s been a pleasure.

Morgan Bazilian:
Thank you so much for having me, Åsa.

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Åsa Borssén:
And thank you for tuning into Highgrade and this Natural Resources Podcast.

The global energy system is undergoing a transformation. Inevitably, this should be expected to come with a degree of geopolitical tension, argues Morgan Bazilian. The shifting demand for green metals and minerals is only one of the pieces in the upcoming foreign policy puzzle.

I do hope that you enjoyed the conversation. Don’t miss our next episode when we will put the magnifying glass on Chile, looking at how to become the world’s top copper producer and how to maintain that status.

As always, thank you to our sponsors the German Federal Ministry for Economic Cooperation and Development, through BGR. Make sure to subscribe to our channel on whichever podcast platform you are using. Until next time, so long!