Energy crisis escalates, could the photovoltaic and battery industries become the biggest winners?

Media reports indicate that amid severe disruptions in the oil and natural gas markets caused by the Middle East conflict, further attacks on energy infrastructure could push crude oil prices to $108 per barrel. This would significantly boost inflation and may even push some European economies toward recession.

This price shock will have global repercussions. In the last century, when similar price surges occurred, importing countries had little choice but to pay higher prices or reduce fuel consumption. However, in this century, the falling costs of solar and batteries offer an alternative.

Antoine Vagneur-Jones, Head of Trade and Supply Chain at Bloomberg New Energy Finance, told the media:

“When a technology becomes cost-competitive, adoption reaches a critical point.”

Europe’s Renewable Energy Transition Accelerates

Media reports that Europe is a typical example. Four years ago, after the Russia-Ukraine conflict erupted, Europe faced a natural gas crisis. At the outset of the crisis, the region had to buy any available liquefied natural gas at high prices. But over the following years, Europe’s solar capacity rapidly increased, followed by a surge in battery deployments.

Despite national debt levels in Europe surpassing heights not seen since World War II, they still have enough capital for the upfront investments needed to install solar panels and batteries. Additionally, before these new energy facilities come online, they can withstand higher natural gas prices.

In contrast, the 2022 crisis hit developing countries much harder. Pakistan, Bangladesh, and Sri Lanka experienced severe blackouts because these countries could not afford liquefied natural gas supplies. Unlike China and India, these nations have little domestic coal resources to rely on.

As a result, some businesses and households in Pakistan capable of affording solar panel costs have started purchasing equipment from China. Demand has grown so rapidly that by 2024, Pakistan became the fourth-largest importer of solar panels globally, after the US, India, and Brazil. Similar to Europe, after a surge in solar installations in one year, battery installations also increased rapidly.

Analysts: If Oil and Gas Disruptions Persist, Customers Will Shift to Renewables

Media reports that solar and batteries cannot replace the oil used in internal combustion engine vehicles or the natural gas used in the chemical industry. Moreover, in major economies like Germany, the recent sharp rise in natural gas prices has so far had limited impact on electricity prices. If natural gas prices do not continue to rise, the motivation to switch to cleaner alternatives will remain weak.

In the past, developing countries faced difficulties building capital-intensive renewable energy projects due to lack of financing channels. But now, the situation has changed, as large demand for solar and batteries in Pakistan and Cuba comes directly from consumers. Additionally, Chinese solar and battery manufacturers are seeking new markets and offering more attractive prices.

Last year, global solar capacity reached a record 655 gigawatts. Before the Iran conflict erupted, analysts expected solar growth to remain roughly flat this year, while grid storage was projected to grow over 50%, as battery prices are expected to decline further.

Analysts state that if disruptions to oil and natural gas supplies continue, this trend could change. The report also notes that current green technology inventories are ample, reducing the likelihood of severe supply chain bottlenecks.

“This could drive customers to adopt technologies like solar and batteries.”

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