How the Strait of Hormuz conflict has turned the energy security debate on its head

HELSINKI, Finland — Iran’s influence over the strategically important Strait of Hormuz has inadvertently changed the energy security debate, effectively making fossil fuels rather than renewables the primary source of vulnerability.

For decades, the conventional narrative has been that technologies such as coal, oil and gas are seen as providing security while renewable energy is criticized for its intermittency issues and dependence on weather conditions.

But the Middle East conflict and the prolonged closure of the Strait of Hormuz, a waterway that typically handles about 20% of the world’s oil and liquefied natural gas supplies, have reframed this debate and exposed the risks associated with fragile fossil fuel supply chains.

Energy experts and CEOs of Nordic energy giants fortum And Statkraft made this clear on the sidelines of the Eurelectric Power summit in the Finnish capital this week.

“So the big belief is that fossil fuels are currently intermittent and uncertain. This is, of course, an argument against renewables,” Kingsmill Bond, energy strategist at UK-based think tank Ember, told CNBC in Helsinki.

“Thanks to batteries, renewable energy has actually become almost constant, given that the sun comes up every morning. So I think we’ve moved into a new environment, but… we’re still too exposed to the old system. And especially in Europe, we need to change. We need to change really quickly.”

Comparing the current situation to the oil crises of 1973 and 1979, Bond said the current energy shock is the first time in history that policymakers have had better alternative technologies to rely on for security.

“If we went back to the 1970s, what would we have done? We built nuclear power, which took 10 years and was expensive. This time we have solar, wind, batteries, electrification, and a lot of flexible technologies that are huge and cheap and can be expanded. And that’s what’s happening,” Bond said.

The US-Israel-led war against Iran has disrupted global energy markets and raised widespread inflation concerns, putting Asia’s dependence on imported energy at the forefront of the global fossil fuel crisis.

Supply disruptions have also hit Europe and Africa hard, with countries grappling with soaring fuel costs and serious threats to food security. With no prospect of an imminent reopening of the Strait of Hormuz, the situation has prompted many to reflect on how deeply dependent the world remains on fossil fuel trade routes.

Asked about intermittency concerns regarding imported fossil fuels, Fortum CEO Markus Lauramo said: “This is a different kind of intermittency, but it is an absolute one. So this is really our message that the solution to our dependence on imported CO2-containing fuels is to actually have clean, domestically produced electricity.”

He added: “That’s the way forward, but we’re very pragmatic. There are definitely intermittencies and we’re not naive about the fact that if you’re running a business or your home is dependent on gas, that’s a big change.”

The evolving energy security debate comes just months after fossil fuel leaders welcomed a paradigm shift in the energy transition narrative.

Several fossil fuel industry officials interviewed by CNBC at the UAE’s annual oil summit late last year supported the concept of “energy addition” to secure supply and meet new demand from areas such as AI.

Energy addition refers to promoting the development of new technologies, such as renewable energy such as solar and wind, alongside existing fossil fuels. In contrast, energy transition typically refers to movement from one energy source to another.

Birgitte Lyngstad-Walddal, CEO of Statkraft, Europe’s largest renewable energy producer, agreed that the energy security narrative regarding clean technologies has changed due to the conflict between Ukraine and Iran.

“And I think the other thing that was developed during this period was batteries, right? I mean, they’re a lot cheaper and they can be stored for a longer period of time,” Walddal said.

Batteries are seen as a way to alleviate intermittency in renewable energy projects by absorbing excess power when generation is high and discharging it when production drops.

“We find that in some countries we used to have these long working hours in the morning and evening, but now we can cover that time with batteries. So we can provide more total power generation by combining batteries and solar, or batteries and solar and wind.”

Shoulder hours are blocks of the day between peak and off-peak energy demand times.

Balddal said the intermittency challenge in Norway, which has a reputation as the gold standard for renewable hydropower, was less of an issue than in other European countries, then added that “volatility is key” in security discussions.

“Ultimately, we think there needs to be some gas in the system to withstand long periods of low production,” Balddal said.

While the Iran war may have marked a major shift in the traditional energy security narrative, switching to alternative energy sources in times of conflict can pose challenges. Some are sounding alarm that Europe is being flooded with American LNG in the wake of Russia’s full-scale invasion of Ukraine in early 2022.

“There’s going to be a lot more LNG in Europe, but given the situation in the Strait of Hormuz, a lot of that LNG is going to come from the United States,” Jan Rosenau, a professor of energy and climate policy at the University of Oxford, told CNBC.

“And that means that we are exposed to one country that is currently considered to be quite politically unstable when it comes to international relations, which is a very problematic situation indeed. And domestic electricity generation from renewables does not face such problems.”