The Geopolitics of the Global Energy Transition

Front matter

TItLIuy

Mantred Hafner Simone Tagliapietra Editors

The Geopolitics ofthe Global Energy Transition va

Foreword

In physics, power is the rate of work per unit time. In geopolitics, it is the ability of one nation to influence the behaviour of other nations. It’s not surprising that the same word, with its root in the Latin posse (to be able), refers to both concepts. A nation’s command of physical power, notably through its control over primary energy resources such as oil, not only shapes its economic development but also its national security and military strength. As such, the international relations of nations are profoundly influenced by the distributions of energy resources and the technologies for their utilization.

Every great transition in energy technology entails a shift in geopolitics as well. Our generation’s energy transition to zero-carbon energy, or decarbonization, will reshape geopolitics of the twenty-first century. This superb volume offers a deeply informed tour d’horizon of the geopolitics of global energy decarbonization, and the ways that geopolitics may stymie or support the transition to climate safety.

Energy transitions have defined several key epochs of human history. Early man’s harnessing of fire changed the genetic and cultural trajectory of humanity itself. The harnessing of wind power for sailing ships enabled sea-based trade and migrations over vast distances. The harnessing of horse power gave rise to empires. And without doubt, it was James Watt’s coal-fired steam engine (building on precursors of Savery and Newcomen) that gave rise to industrialization, and with it, to Britain’s remarkable global hegemony in the nineteenth and early twentieth centuries.

Watt’s invention, commercialized around 1776, ushered in the Fossil-Fuel Age, a period of more than two centuries in which global economic growth has been powered by solar energy of tens of millions of years ago stored in fossilized remains of plant and animal life. By gaining the ability to harness the fossil fuels—coal, oil and natural gas—humanity tapped into a seemingly limitless reserve of power. Watt’s coal-fired steam engine was followed by Daimler and Benz’s internal combustion engine for automobiles, and Parsons’ and Curtis’s gas turbines for transport and mechanical power.

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The global distribution of fossil fuel is highly unequal, with some countries blessed with massive reserves and others bereft of fossil fuels that are exploitable on an economical basis. Ownership of plentiful fossil fuels, not surprisingly, has tended to give a huge boost to economic development, military might and geopolitical influence. Britain’s highly accessible coal reserves were essential to turn Watt’s new steam engine from a mere curiosity to the source of Britain’s imperial might. Other countries with accessible coal reserves generally found an earlier path to industrialization in the nineteenth and twentieth centuries.

By the early twentieth century, oil joined coal as a new key currency of geopolitics, especially after Winston Churchill ordered Britain’s navy to convert from coal-burning steam engines to oil-burning steam engines, to be followed later by the navy’s conversion from steam power to diesel engines. The control of oil became key to military and geopolitical power. Like coal, oil was very unequally distributed around the world. Oil-rich regions like the US and Russia gained vast geopolitical and economic advantages, or alternatively fell victim to military conquests by Britain, the US, Russia and other major powers that acted militarily to secure their oil supplies.

But for the climate crisis, the fossil-fuel era would surely be continuing today and into the future with the exploitation of new fossil-fuel reserves through fracking, deep-sea drilling and other advances in exploration, development and utilization. Despite claims to the contrary, the world has enough coal, oil and natural gas to last for centuries. The fossil-fuel era is ending not by running out of fossil fuels but for a wholly different reason, indeed a quirk of quantum physics. As great nineteenthcentury scientists including Fourier, Tyndall and Arrhenius came to realize that fossil fuels have a pesky side effect. When they are combusted, they release carbon dioxide (CO2) into the atmosphere, and CO, has the quantum physical property of absorbing electromagnetic radiation at infrared wavelengths. The implication? Atmospheric CO, warms Earth by trapping infrared radiation that would otherwise radiate from Earth to outer space. CO, is, in modern parlance, a greenhouse gas. To an extent, this is life-saving good news. Without atmospheric CO, and other greenhouse gases, Earth would be as cold and lifeless as the moon. Yet with too much atmospheric CO, the Earth’s temperature will rise to dangerous levels.

Such is our current predicament and the backstory of this important volume. Humanity has already raised the atmospheric concentration of CO, from 280 parts per million (ppm) to around 415 ppm in May 2019, mostly through fossil-fuel use but also through deforestation and other economic activities. The result is that the planet is now around 1.2 °C warmer than when Watt unveiled his world-changing steam engine. 1.2 °C might not seem like much, but it is enough to make Earth warmer than at any time since the start of civilization itself some 10,000 years ago. It is enough to be disrupting societies, economies and ecosystems around the world. We are already in an era of intense storms, rising sea levels, droughts, floods, emerging infectious diseases, massive forest fires and other climate-related disasters. We are already suffering worldwide losses amounting to hundreds of billions of dollars per year, and mass displacements of populations, including losses of life.

Foreword Vii

And the prospects of further warming are even more dangerous. The Earth is already at, or soon will be at, temperatures high enough to result in a multi-metre rise of ocean levels, with the consequence of disrupting lives for hundreds of millions or billions or people around the world. Moreover, the Earth’s climate system is characterized by multiple ‘positive feedbacks’ that amplify the human-induced warming, such as the loss of sea ice (which reduces the Earth’s albedo and accelerates warming), the melting of the permafrost (which releases methane and carbon dioxide) and the drying of rainforests (turning them from carbon sinks to carbon sources).

For all of these reasons, every UN member state adopted the Paris Climate Agreement in December 2015, to hold warming to ‘well below 2 °C’ and to aim to limit warming to 1.5 °C or less. Each country is to put forward a ‘nationally determined contribution’ of energy transformation and other economic changes (e.g. in land use and diets) so that the sum of the national efforts will be sufficient to achieve the global goal. The Intergovernmental Panel on Climate Change (IPCC) has, in turn, underscored the importance of adhering to the lower bound of 1.5 °C rather than 2 °C in order to improve the prospects of climate safety. Moreover, to have a likely (>66%) outcome of 1.5 °C or less, the world as a whole must achieve net-zero greenhouse gas emissions by 2050. In shorthand, the world must decarbonize by 2050 and shift from net deforestation to net reforestation and afforestation. So far, the world is grievously off-track, hurtling towards warming by 2100 of 3 °C or higher.

The engineers have made clear that decarbonization by 2050 is feasible, by shifting power generation from coal, oil and gas to zero-carbon energy sources (wind, solar, geothermal, hydro, ocean, biomass, nuclear or fossil fuel with carbon capture and storage), and by using that zero-carbon power to provide the energy for downstream uses, notably transport, buildings and industry. To the extent possible, downstream uses should be directly electrified, as with light-duty battery-electric vehicles and electric heat pumps for home heating. And when direct electrification is not feasible, the zero-carbon power should be used to create synthetic (or ‘green’) fuels such as hydrogen, green methane, green ammonia and other fuel carriers that can be combusted without releasing CO, into the atmosphere. The amazing finding by economists and engineers is that most or all of the decarbonization is within reach at very low cost, perhaps 1% or less of annual world output until 2050.

Yet here geopolitics enters the scene. Indeed, geopolitics may prove to be the single biggest factor in the success or failure of the world’s quest for decarbonization and energy safety. The limiting factor in decarbonization, it seems, is not low-cost alternatives, nor the shortage of zero-carbon primary energy sources (solar radiation and wind alone could power the planet). The limiting factor, it seems, is global political cooperation to get the job done through a variety of policy instruments such as carbon pricing, public investments, public—private R&D and government regulation. And what is the real source of this political resistance? One answer is the usual problem of free-riding, as each nation tries to get the others do the hard work and bear the incremental costs. But something else is at play: geopolitics.

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For two centuries, national control over fossil fuels has been the key to the global realm. National security, military strength and political power have been deeply intertwined with the nation’s control over fossil fuels, especially in the case of countries that are rich in fossil-fuel reserves. And when global superpowers have lacked sufficient domestic supplies of key energy resources (such as the British Empire and oil during 1900-1950, and the US and oil after 1945 at least until recently), they have deployed their military might to secure effective control over overseas oil, often through wars or coups to install pliant regimes, especially in the hydrocarbon-rich Middle East.

The energy transition to zero-carbon energy is, for these reasons, being heavily shaped—and more specifically, slowed—by today’s fossil-fuel-rich countries, especially the US, Russia and Saudi Arabia, but also Canada, Australia, Venezuela, Brazil, Mexico, Iran, Iraq and others. If the world succeeds in decarbonizing, these fossil-fuel-rich countries stand to lose, at least relatively, in three ways. First, they will suffer major capital losses as their fossil-fuel reserves are stranded (that is, left under the ground by the requirements of climate safety). Second, they will suffer ancillary economic losses as their treasuries can no longer finance the public sector through fossil-fuel rents. Third, and perhaps as consequential as the first two, they will lose geopolitical relative advantages as their concentrated holdings of fossil fuels are supplanted by globally diffuse access to wind, solar, hydro and other zero-carbon energy sources.

The two populous giants of the planet, China and India, are perhaps the most complex players in the unfolding geopolitics of the energy transition. On the one hand, both of these giants are densely populated and highly vulnerable to climate change, India especially. China is water scarce, especially in the north, and further global warming could play havoc with China’s ecosystems. India is heavily tropical, water scarce and already under intense ecological stress and degradation. Parts of India are now reaching 50 °C summer days in the context of global warming. Large swaths of India could be rendered essentially uninhabitable through the combination of poverty, water stress, global warming, air and water pollution, soil degradation and other forms of environmental degradation. Nor are these two countries fossil-fuel-rich. They each have enough coal to do dire and lasting damage to the global environment, but they are also both heavily dependent on imported hydrocarbons.

The EU is another key region in this geopolitical puzzle. As one of the three hubs of the global economy, together with North America and Northeast Asia, Europe’s energy transition is a vital part of the global story. Europe is mostly fossil-fuel-poor (especially after two centuries of fossil-fuel extraction and use). As such, the European politics are strongly directed towards decarbonization, except in the few remaining pockets of local coal production (Germany, Eastern Europe and Spain).

The energy transition geopolitics to date, therefore, shapes up as follows. The major fossil-fuel powers are generally resistant to decarbonization, now led by the Trump Administration, which has become an outright foe determined to topple the Paris Climate Agreement. While Russia, Saudi Arabia, Australia, Brazil and others

Foreword ix still offer rhetorical support for decarbonization, in practice they tend to line up behind Trump in closed-door negotiations. The European Union is on the other end of the geopolitical spectrum, with much to lose from global warming (as is basically true everywhere) and with little at stake in terms of European fossil-fuel reserves. China and India are the world’s swing actors, giants that can shape the planet’s climate prospects this century, and with mixed motives. On the one hand, they face potential disasters with runaway climate change and are in any event heavily dependent on hydrocarbon imports. On the other hand, they still have significant domestic deposits of coal, which provide vast employment and which constitute a powerful industrial lobby for the status quo.

Of course, as this volume spells out in considerable and illuminating detail, the geopolitical issues extend beyond fossil-fuel haves and have-nots. The zero-carbon energy technologies will also give rise to new global value chains, for example, for the key minerals used in solar panels, wind turbines and batteries. Copper, lead, molybdenum, nickel, zinc, cobalt, lithium and rare earth minerals are all key inputs into the new zero-carbon technologies. These mineral resources are also unequally distributed around the world. Many are located in unstable and impoverished societies (such as the Democratic Republic of the Congo and cobalt reserves). Already the world’s major regions are anticipating an intense rivalry and geopolitical competition over global supply lines for the key minerals. As with the past century’s many wars over oil, this century could see wars over the mineral inputs to the new energy economy.

The geopolitics of the energy transition will, therefore, involve an intense and highly disruptive era of international relations, one that could end up sinking the world’s hopes for climate safety under a multi-metre sea-level rise—if global delay and disruption prevail over global cooperation. To succeed globally, we will need to chart an era of unprecedented cooperation. Here too, this volume is of inestimable value and insight. Global success will require new forms of industrial policy, global diplomacy, transnational infrastructure, global-scale public—private partnerships for research and development and shared policies to adjust to ongoing climate change as well as to decarbonize the energy system.

In sum, we are in for a tumultuous era in geopolitics that will require our greatest reservoirs of wisdom, tolerance, diplomacy and global-scale cooperation. To reach such an unprecedented degree of cooperation, we will need an unprecedented degree of global understanding. This unique volume offers a vital and timely contribution to that much-needed new era of global understanding.

Jeffrey Sachs Columbia University New York, USA

Preface

The world is undergoing an historical energy transition, driven by increasingly strong decarbonization policies and quick low-carbon technology developments.

The Paris Agreement marked a major step forward in global efforts to address global warming. For the first time, developed and developing countries committed to act in order to limit global average temperature increase to well below 2 °C, and to pursue efforts to further limit this to 1.5 °C above pre-industrial levels. This reinforces decarbonization measures already being undertaken in different parts of the world. With its Special Report on Global Warming of 1.5 °C, the Intergovernmental Panel on Climate Change (IPCC) stepped up pressure on decarbonization, outlying that limiting global warming to 1.5 °C would require rapid, far-reaching and unprecedented changes in all aspects of society.

Meanwhile, technological advancements have significantly increased the cost-competitiveness of low-carbon technologies such as solar and wind power generation, power storage technologies and electric vehicles. This has already started to reshape the global energy system, notably by giving a greater role to solar and wind in the power generation mix.

By transforming the global energy architecture, international decarbonization policies and low-carbon technology advancements will also have profound geopolitical implications. The large-scale shift to low-carbon energy is disrupting the global energy system, impacting economies and changing the political dynamics within and between countries.

This book seeks to provide a comprehensive analysis of the geopolitical aspects of the global energy transition, from both regional and thematic perspectives. An introductory chapter will set the scene by presenting the big picture of the challenges and opportunities related to the global energy transition, from a technological, economic and geopolitical perspective. The first part of the book will provide a set of regional insights, aimed at analysing the geopolitical implications of the global energy transition in the world’s main energy-producing and energy-consuming regions. The second part of the book will provide in-depth focuses on selected issues, spanning from the geopolitics of renewable energy to the xi xii Preface mineral foundations of the global energy transformation, up to the governance issues related to the changing global energy order.

Presenting a comprehensive overview of the issue, this book aims to be accessible to a wide readership of both academics and professionals working in the energy industry, as well as to general readers interested in the ongoing debate about energy and climate change.

This book has been written just before COVID-19 hit our societies and economies. The impacts of the pandemic have not spared the world of energy. Lockdown measures put in place all over the world to contain the contagion indeed represented an unparalleled shock to the economies and to energy markets with dramatic impacts to oil and gas markets. The effects of this situation on the global energy transition remain, at the time of writing, difficult to assess. On the one hand, the economic crises and the historical disruption experienced by the petroleum industry might negatively impact the global energy transition, as public and private investments needed for the energy transition may now be channelled into economic recovery and as low-cost oil and natural gas could temporarily slow-down the deployment of clean energy technologies. On the other hand, the aggressive economic recovery policies being adopted by governments across the world could represent a formidable driver for the global energy transition, if focused on green investments as seems to be the case in several countries/regions. Whatever the impacts of COVID-19 on the geopolitics of the global energy transition will ultimately be, they will inevitably build on the challenges and opportunities described in the different chapters of this book. The present work can thus also be considered as a tool to understand the geopolitical fundamentals of the global energy transition that COVID-19 might contribute to reshape.

Support from the Fondazione Eni Enrico Mattei (FEEM) in realizing this book and financing its open access is gratefully acknowledged. Founded in 1989, FEEM is a non-profit, policy-oriented, international research centre and a think tank producing high-quality, innovative, interdisciplinary and scientifically sound research on sustainable development. It contributes to the quality of decision-making in public and private spheres through analytical studies, policy advice, scientific dissemination and high-level education. Thanks to its international network, FEEM integrates its research and dissemination activities with those of the best academic institutions and think tanks around the world.

Within FEEM, the Future Energy research Program (FEP), where this book has been conceived and elaborated, aims to carry out interdisciplinary, scientifically sound, prospective and policy-oriented applied research, targeted at political and business decision-makers. This aim is achieved through an integrated quantitative and qualitative analysis of energy scenarios and policies. This interdisciplinary approach puts together the major factors driving the change in global energy dynamics (i.e. technological, economic, financial, geopolitical, institutional and sociological aspects). FEP applies this methodology to a wide range of issues such as energy demand and supply, infrastructures, market analyses and socio-economic impacts of energy policies.

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The editors are thankful to Paolo Carnevale and Luca Farinola, respectively, Executive Director and Financial Director of FEEM, for their strong support in the realization of this book. They also thank Barbara Racah and Pier Paolo Raimondi for their help throughout the editorial process. Finally, a special acknowledgement to Prof. Jeffrey Sachs for his inspiring foreword and for the precious cooperation established between FEEM and SDSN to lay down a scientific pathway towards total decarbonization by 2050.

Milan, Italy Manfred Hafner June 2020 Simone Tagliapietra

Introduction

Energy has long shaped global geopolitics, determining great powers, alliances and outcomes of wars. Every international order in modern history has been based on an energy resource: coal was the backdrop for the British Empire in the nineteenth century, oil has been at the core of the subsequent ‘American Century’, and today many expect China to become the twenty-first century’s world renewable energy superpower.

Since World War I, oil has undoubtfully represented the cornerstone of global energy geopolitics. The decision of then-First Lord of the Admiralty Winston Churchill to shift the power source of the Royal Navy’s ships from coal to oil in order to make the fleet faster than its German counterpart truly signed the opening of a new era. The switch from the reliable coal supplies from Wales to the insecure oil supplies from what was then Persia, not only made the oil-rich Middle East a key epicentre of global geopolitics, but also turned oil into a key national security issue.

Since the early twentieth century, control of oil resources played a central role in several wars. This was, for instance, the case of the 1967—1970 Biafran War, the 1980-1988 Iran-Iraq War, the 1990-1991 Gulf War, the 2003-2011 Iraq War and of the conflict in the Niger Delta ongoing since 2004.

The second half of the twentieth century also saw increasing tensions between oil-producing and oil-consuming countries, which in two cases erupted in major oil crises. In September 1960, the Organization of Petroleum Exporting Countries (OPEC) was established in Baghdad, with the participation of five member countries: Saudi Arabia, Iraq, Iran, Kuwait and Venezuela. The original aim of OPEC was to prevent its members from lowering the price of oil, by coordinating their production and export policies. During the 1970s, some of OPEC members also had the aim of nationalizing their petroleum resources to preserve sovereignty.

The geopolitical role of OPECs became clear as the Arab-Israeli War—also known as Yom Kippur War—erupted in October 1973. Arab members of OPEC imposed an embargo against the United States, the Netherlands, Portugal and South Africa in retaliation of their support to Israel. A ban of oil exports to the targeted countries as well as oil production cuts was introduced by OPEC. This resulted in a

XV xvi Introduction sharp rise in oil prices, and in severe oil shortages and spiralling inflation across the West. As OPEC kept raising prices in the following years, its geopolitical and economic power grew.

In the aftermath of the 1973 oil crisis, and upon proposal of then-US Secretary of State Henry Kissinger, the IEA was established in November 1974 as a platform for oil-importing countries in the West to coordinate a shared response to major disruptions in the supply of oil. This was also allowed by the introduction of a requirement for all IEA member countries to maintain strategic petroleum reserves equal to at least 90 days of their previous year’s net oil imports.

A second oil crisis erupted in 1979, as a result of the Iranian revolution and the following 1980-88 war with Iraq, which brought the region into turmoil. By 1981 the price of oil stabilized at USD 32 per barrel, a level ten times higher than before the 1973 oil crisis.

In the following decades, other oil price shocks occurred, notably in relation to major geopolitical developments in the Middle East. For instance, in 1990, an oil price shock took place in the aftermath of the Iraqi invasion of Kuwait, with a doubling of oil price in a matter of few months that contributed to the early 1990s recession in the United States.

But energy geopolitics is not limited to oil. Natural gas, nuclear energy and even renewable energy sources such as wind and solar do have—more or less critical— geopolitical aspects.

In certain areas of the world, natural gas is even considered to be more geopolitical than oil. This certainly is the case of Europe, where natural gas markets have been developed since the 1960s on the basis of large pipeline infrastructures connecting key suppliers such as Russia and Norway to European consumers. This situation has led to an over-reliance of Europe on few major suppliers. Natural gas imports from Russia indeed continue to provide a third Europe’s total natural gas supply mix.

For decades, this situation has not raised energy security concerns in Europe. During the 1970s and the 1980s, in the midst of the Cold War, Europe decisively pursued the construction of the long pipelines connecting the large Siberian natural gas fields and Europe, which still today represent the main avenues of Russian natural gas export. Europe pursued these projects notwithstanding the strong opposition of the Reagan Administration, which even sanctioned German and French companies engaged in the construction of the ‘Brotherhood’ pipeline, which still today represents the major natural gas supply route to Europe.

The (over-)reliance on Russian natural gas supplies started to be considered as a major geopolitical threat in Europe when, first in January 2006 and then in January 2009, natural gas pricing dispute between Russia and Ukraine led to the halt of Russian natural gas supplies to Europe via Ukraine—its primary transit route. This generated economic damages for Europe, notably in South-Eastern European countries heavily dependent on Russian natural gas for both electricity generation and residential heating. Europe responded to these natural gas crises by adopting an energy security strategy mainly focused on reducing its dependency on Russian natural gas supply. In the midst of the 2014 Ukraine crisis, concerns about a

Introduction xvii potential politically motivated disruption of all European natural gas supplies from Russia lifted again this issue to the top of the European agenda, leading to renewed efforts to lower the European dependency on Russian natural gas supply under the umbrella of the European Union (EU)’s ‘Energy Union’ initiative.

On its side, nuclear energy presents both security and geopolitical concerns. Issues like safety of nuclear facilities and nuclear waste management represent serious security concerns. The concerns for nuclear safety have particularly amplified after the Chernobyl accident in 1986 and the Fukushima disaster of 2011. These events sparkled, particularly in Europe and in Japan, broad public debates on nuclear energy. In certain cases, these debates led to radical energy policy shifts. For instance, after the Chernobyl accident Italy holds a referendum on nuclear power, which resulted in the decision to close-down all operating nuclear power plants in the country. More recently, after the Fukushima disaster a surge of anti-nuclear protests in Germany pushed Chancellor Angela Merkel to announce the closure of around half of the operating reactors in the country and the complete phase out of nuclear by 2022. These concerns have been most recently accompanied by the emergence of new risks concerning potential terrorist attacks at nuclear power plants.

From a geopolitical perspective, proliferation is the main risk associated to nuclear energy. Elements of the nuclear fuel cycle can, in fact, be used to develop nuclear weapons, either through uranium enrichment or through reprocessing (i.e. the separation of plutonium from the highly radioactive spent fuel). It was precisely the close link between the civil and military use of nuclear energy that led to the establishment in 1957 of the International Atomic Energy Agency (IAEA), a United Nations organization tasked of promoting the peaceful use of nuclear energy. In 1968 (i.e. in the midst of the Cold War), the General Assembly of the United Nations also approved the Nuclear Non-Proliferation Treaty, aimed at the disarmament of countries with nuclear weapons, as well as at the prevention of nuclear weapons adoption by countries still without them.

But if for more than half a century oil, natural gas and nuclear energy have been at the heart of the geopolitics of energy, it is sensible to investigate if and how this will change as a result of the global energy transition, a process driven by decarbonization policies and by quick developments in renewable energy technologies and electric cars.

The Paris Agreement marked an important step forward in global efforts to respond to the challenge of global warming. For the first time, developed and developing countries have committed themselves to act to limit the increase in the average global temperature to well below 2 °C compared to pre-industrial levels. This reinforces the decarbonization measures already in place in several parts of the world, primarily in Europe. Meanwhile, technological advances have increased the competitiveness of solar and wind energy technologies, batteries and electric cars. The convergence of these two elements has already begun to reshape the global energy system. By transforming the global energy architecture, international decarbonization policies and low-carbon technology advancements will also have profound geopolitical implications. The large-scale shift to low-carbon energy is xviii Introduction disrupting the global energy system, impacting economies and changing the political dynamics within and between countries. But what will be the consequences of these developments on the geopolitics of energy?

As far as energy-importing countries are concerned, the consequences will certainly be positive. In these cases, as imports of oil and natural gas will decrease, both their ‘national energy bill’ and the associated geopolitical risks will decrease.

Countries that are able to innovate more in renewables, batteries and electric cars will also be able to reap the industrial and economic benefits of this transition, generating jobs and economic growth.

But, of course, the energy transition will also see the emergence of new geopolitical challenges.

Firstly, the global energy transition represents a challenge for oil- and gas-producing countries, and, in particular, for those with a less diversified economy more dependent on oil revenues. This is the case for many countries in the Middle East and North Africa which, despite the adoption of elaborate strategies for economic diversification, have not really made much progress in this direction. If the global energy transition were to take place more quickly than expected, and if these countries were to remain unprepared, the consequences could be serious from both the socio-economic and geopolitical points of view.

Secondly, the spread of renewable energies will increase electrification and stimulate cross-border trade in electricity. Energy sources such as solar and wind require flexible energy systems that can cope with the variability of weather conditions. Smart electricity grids will, therefore, play an increasingly important role in mitigating this variability and ensuring system stability. The digitization of electricity grids clearly presents security risks, as terrorist groups or hostile countries could seek to either enter the systems to extrapolate information, or to disrupt them to cause economic and social damages.