Energy Security Fears Grow Amid Middle East War: "Need for Renewable Energy Transition Grows, But Immediate Acceleration Faces Limits"

KIET Releases Report

"Constraints Include Investment Costs, Electricity Demand, and Mineral Bottlenecks"

"Need for Parallel Strategies: Infrastructure, Demand Management, and Supply Chain"

Amid growing instability in global energy supplies due to the aftermath of the Middle East war, the need for a transition to renewable energy is once again coming to the forefront. However, analysts note that various short-term constraints remain, making it difficult for the pace of transition to accelerate immediately.

On April 12, the Korea Institute for Industrial Economics & Trade (KIET) stated in its report, "Will the Middle East War Accelerate the Transition to Renewable Energy?" that "since the Middle East crisis, the deepening energy security crisis has highlighted renewable energy as a key means for energy self-sufficiency, beyond just responding to climate change."

The report analyzed that following the U.S. and Israeli attacks on Iran and subsequent blockades of the Strait of Hormuz, disruptions in oil and gas supplies and soaring prices have increased uncertainty in the global energy market. As a result, discussions on expanding renewable energy are spreading across various countries.

However, the report also pointed out that such crises are unlikely to immediately lead to a transition to renewable energy. The so-called "cost paradox" has emerged, in which rising fossil fuel prices simultaneously increase investment costs and supply chain burdens for renewables, and in the short term, the move to substitute coal and gas for other fossil fuels may intensify.

In particular, the surge in electricity demand driven by the proliferation of artificial intelligence (AI) is cited as another constraint. As electricity demand rapidly increases, securing supply is being prioritized over transitioning energy sources. Additionally, supply bottlenecks for critical minerals essential for expanding solar and wind power, as well as the integration costs with existing power grids, are making the conditions for transition even more complex.

The report stressed that in order to effectively accelerate the shift to renewable energy, policy responses to address these constraints must be implemented in parallel. It recommended first securing investment stability in renewables through mechanisms such as Contracts for Difference (CfD) or long-term fixed price agreements, and proactively expanding the construction of energy infrastructure such as power grids.

The report also pointed out that so far, the expansion of renewables has mostly covered only incremental demand rather than replacing existing energy sources, and stated that it would only be possible to achieve a meaningful transition if demand reduction and restrictions on fossil fuel use are implemented simultaneously.

Furthermore, it emphasized the need to mitigate energy security risks through resource diplomacy and international cooperation to secure critical minerals, and to diversify supply chains, while also maintaining a stable supply of fossil fuels throughout the transition process.

KIET concluded, "The transition to renewable energy is not merely about expanding facilities, but about transforming the entire structure of energy demand and supply," and suggested that "a comprehensive approach is needed that simultaneously addresses short-term crisis management and long-term transition strategies."

This content was produced with the assistance of AI translation services.