How geopolitics is shaping our energy future

The global energy sector is facing a period of greater geopolitical uncertainty, rising costs, and political volatility, with policymakers struggling to balance long-term energy investment with the short-termism driving political decision-making, according to Malcolm Moore, Energy Editor of the Financial Times.

Malcolm Moore identifies three key features of the global energy sector. He says that politics “moves faster than the energy sector”, citizens and consumers want costs to reduce, and that things are going to get worse before they get better.

His central argument is that political change is increasingly outpacing the ability of the energy system to respond. The sector operates on “investment horizons measured in decades”, while governments can “change direction within a single electoral cycle”.

Moore points to the US Government’s reversal of the Inflation Reduction Act, changes in the UK’s approach to Chinese investment in nuclear power, and continuing uncertainty around the Jackdaw and Rosebank projects.
He says that the challenge is that companies have “made investment decisions and allocated capital only for the politics to turn against them”.

This volatility is occurring alongside a succession of major disruptions to the energy system. Moore points to the post-Paris Agreement push for decarbonisation, the gas crisis following Russia’s invasion of Ukraine, the return of inflation and higher interest rates, US trade wars and anti-renewable rhetoric, and the war in Iran.

“It has been a golden decade for energy traders, but it is rather less comfortable for those attempting to plan projects that have to generate returns over 30 years or more,” he says.

At the same time, governments are increasingly emphasising energy security, resilience, diversification, and national sovereignty. However, Moore argues that the energy system remains deeply globalised, not only through international oil and gas markets but through supply chains for magnets, solar panels, batteries, electric vehicles, and transformers.

“The energy sector is still living in the past, relying on globalisation while politicians are increasingly seeking to dismantle that system.”

Cost

On cost, Moore outlines how governments have demonstrated twice, following the crises triggered by Ukraine and Iran, that their instinct is to intervene when energy prices rise sharply.

“Business and consumers cannot bear any further economic pain, is the political instinct, resulting in subsidies and price caps rather than a longer-term focus on resilience.”

The difficulty is that falling technology costs “do not necessarily mean a cheaper energy system”. Moore says costs are increasingly shifting towards the grid, planning, cybersecurity, physical security, resilience, and financing.

He identifies three separate costs. The first is the transition cost, because the existing system must continue operating while new infrastructure is built. The second is the resilience cost, reflecting the spare capacity and redundancy needed to withstand shocks. The third is a political cost resulting from efforts to avoid dependence on cheaper suppliers, particularly China.

These pressures are likely to make the transition “more difficult before conditions improve”. “The existing system has to remain reliable while its replacement is constructed, while electricity demand is simultaneously increasing because of AI, cooling, electric vehicles, and industry.

“We are trying to reduce dependence on established suppliers before there are alternatives, while investment in fossil fuels is being discouraged despite continued dependence on them. The old system is becoming less investable, and the new system is not ready.”

Moore therefore expects the energy transition to involve higher prices, more volatility, and higher financing costs, alongside project delays and political uncertainty.

He argues that governments need to take a “more strategic approach to energy security”, identifying which parts of the system require protection and ensuring that capacity and supply chains are available when needed.

The Chinese model

China provides an example of what this approach can look like. Moore, who spent eight years living in Shanghai and Beijing, says China places “geopolitics and security at the heart of its planning”, reducing its dependence on imported energy, building strategic reserves, and developing domestic capacity across the energy value chain.

“We cannot copy the Chinese model, but we can learn some lessons. Among those lessons is whole-system thinking because energy investment is considered alongside national security and defence.”

Moore also advocates for greater long-term planning, saying developers need confidence that projects will not be fundamentally altered from one electoral cycle to the next.

“Nuclear power is one potential area for longer-term agreement in Europe, given the need for firm power and reduced dependence on Chinese supply chains. Meanwhile, the security debate could improve the economic case for biofuels, hydrogen, and e-fuels.”

The FT editor argues that policymakers need to adopt a more realistic approach to the transition, with “fewer grand promises” and “more realism about the compromises” involved.

Concluding, Moore says: “The answer is not for the energy sector to speed up, but for politics to slow down. We need a system that is secure, shockproof, and resilient to changing geopolitics while remaining affordable to the public.”

Malcolm Moore is the Energy Editor of the Financial Times. Previously, he was Head of FT Edit, a foreign correspondent in Italy and China, and an editor on the UK and technology desks.