For more than a decade, Fatih Birol has been one of the world's most influential voices in energy markets. As the head of the International Energy Agency (IEA), he advises presidents and energy ministers; CEOs follow his view of the market with careful attention.
When we caught up at the United Nations climate change conference, known as COP31, currently underway in Antalya, Turkey, he offered a blunt analysis: the war in Iran has unleashed a structural shift. "I don't see any credible pathway in which the world of energy is going back where it was before the Iran War," he said on Nov. 13.
A quick analysis might boil this shift down to simple terms. In general, the focus on energy security will mean more renewable energy because it can be produced locally. It will mean efficiency measures so that countries use less fuel and are less vulnerable to shocks. Indeed, an energy crisis policy tracker from the IEA cites dozens of policies countries have laid out this year to do just that—from a push for biodiesel in Indonesia to incentives for consumers to install solar and storage in Bangladesh.
But Birol says the coming structural changes in energy will have even wider implications, shaping economic and geopolitical outcomes. He cites economic diversification plans from oil-exporting countries, new trade partnerships, and investments in new technologies like next-generation batteries and nuclear power. All of which comes with an eye toward safeguarding energy supply from supply disruptions. "Instead of importing energy, they are deciding to build energy," he told me.
A key theme in Antalya—and on Birol's mind—is electrification. Right now less than a quarter of final energy consumption comes from electricity. The rest comes primarily from fuel consumption, think of petrol in vehicles, heating oil in homes, or gas in stoves. Relying on electricity, which tends to be produced relatively close to where it's used, addresses energy security concerns. That's even more the case when electricity is produced using renewables rather than imported fossil fuels.
The COP31 presidency is pushing countries to pledge to rely on electricity for 35% of their final energy consumption by 2035. The world's electricity grid still relies on fossil fuels to some degree—more or less so depending on the area—but today it's typically cleaner than most fossil fuels. It will be even cleaner as renewable deployment continues.
Electrification also represents a structural shift. It promises to reshape trade relationships as countries need to either build clean technology supply chains or identify friendly partners to build relevant trade relationships. It will spur investment in the power sector, advancing both big electric infrastructure projects and creating new companies that build innovative electricity technologies. In the IEA's special report on electrification released in September, the agency says that annual global investment in electricity generation, battery storage, and grids could total $2.5 trillion by 2035 in a scenario where electrification really takes off. That's a $1 trillion increase from last year. And electrification promises to unlock—or at least lessen—the stranglehold that oil and gas has on geopolitics while elevating the importance of another set of resources, including critical minerals.
