How renewable energy shields countries from oil shocks

How renewable energy shields countries from oil shocks

The ongoing conflict in Iran has created significant turbulence in global oil and gas markets, raising concerns about energy costs worldwide. Experts argue that expanding domestic renewable energy capacity is crucial for reducing vulnerability to future disruptions.

Geopolitical tensions and energy resilience

As the Middle East conflict intensifies, strategic infrastructure has become a target, with the Strait of Hormuz—key to transporting 20% of global oil and gas—effectively closed due to the risk of Iranian strikes. This has led to supply constraints, particularly for nations that rely on fossil fuels for electricity, heating, and transportation, amplifying price increases and intensifying economic pressures.

“Energy serves as the lifeblood of our societies and industries,” Froggatt stated. “Despite this, we remain heavily dependent on fossil fuels.”

While fossil fuels still supply about 80% of the world’s primary energy, their dominance heightens susceptibility to political upheavals. Rana Adib, from REN21, highlights that countries with stronger renewable energy integration are better equipped to weather such crises.

Uruguay’s shift to renewables

Following the 2008 financial crisis, Uruguay prioritized renewable energy to minimize reliance on imported oil. Two decades ago, the nation with 3.5 million residents began transitioning away from fossil fuels by rapidly expanding wind farms. Today, over 90% of its electricity comes from renewables like wind, solar, hydropower, and biofuels, with some years reaching 98%.

“Adib highlighted that Uruguay has achieved a fully renewable electricity grid without requiring substantial energy storage solutions to address intermittency.”

Uruguay’s shift has proven beneficial, stabilizing energy costs during the Ukraine-linked crisis. “This demonstrates that a 100% renewable grid is feasible,” Adib added. “Uruguay managed this without large-scale storage, showing how local energy sources can buffer against global price spikes.”

Additionally, the move has generated 50,000 jobs and saved $500 million annually in import expenses. However, the country still depends on fossil fuels for transport and industry, though efforts are underway to electrify public transit and decarbonize manufacturing.

Denmark’s renewable ambitions

Denmark, similarly impacted by the 1970s oil crisis, began investing in renewables early. Over 80% of its electricity now comes from green sources, with wind contributing nearly 60%. The nation of 6 million aims for a fossil-free grid by 2030. Its district heating system, linked to 65% of homes, has largely replaced coal and plans to rely entirely on renewable biomethane by that year.