The ongoing conflict in the Middle East has severely disrupted global oil and gas supplies, resulting in the selective closure of the Strait of Hormuz. This has affected infrastructure across the region and international energy flows, creating erratic increases in oil and gas prices, thereby nudging states to seek renewable energy as an alternative.
Addressing this pressing challenge, a latest report by the International Renewable Energy Agency (IRENA) in its policy advisory suggested a policy shifts in the form of rebates in pricing and alternatives such as distributed renewable energy and battery energy solutions.
To shift dependence on fossil fuels, the research recommended fast-tracking time-of-use tariff adoption to enable consumers to shift their electricity consumption to times when renewable supply to the grid is high and prices are low. This approach, as recommended by IRENA, can reduce reliance on gas-fired ‘peaking’ power plants.
Distributed Renewables & Policy Support Offer Short-Term Relief
In the short term, IRENA suggested the deployment of distributed renewable energy solutions combined with cross-sector partnerships to mobilize financial and logistical support to fast-track renewable energy deployment.
Additionally, the report suggested using solar photovoltaic (PV) and battery hybrid mini-grids in off-grid and weak-grid remote areas to reduce the immediate exposure of low-development communities. This would accelerate renewable energy deployment and insulate against diesel price volatility and supply disruptions.
Moreover, it suggested policy support in the form of fiscal measures such as grants, subsidies, tax rebates, and other incentives to support electrification across all sectors.
It also recommended policy changes to review and reduce or remove tariff and non-tariff barriers for imported renewable energy equipment, such as solar PV panels, inverters, batteries, and charging infrastructure.
As another key measure to accelerate two- and three-wheeler electrification in emerging economies, IRENA suggested incentivising the electrification of public transport (buses) by providing financial and fiscal support.
Pipeline Projects Must Remain Funded
In the medium term, IRENA called for fast-tracking current renewable energy and grid infrastructure projects and ensuring pipeline projects remain funded, including by establishing specific national task forces for this purpose.
It also recommended incentivizing battery energy storage deployment and electricity demand management to support the integration of higher shares of solar and wind power. It further recommended leveraging grid enhancement technologies to relieve near-term grid constraints, supporting smoother integration of new renewable supply and electrified demand.
It suggested incentivising the deployment of renewables-based heating solutions, including waste- and residue-based biogas and biomethane, residential heat pumps, and solar water heaters. It also called for scaling up battery storage deployment within off-grid electrification programmes to enhance system resilience and reduce long-term system costs.
As diesel prices rise, the value of battery storage increases substantially through avoided fuel costs. IRENA suggested that with estimated savings of USD 2–5 for every dollar invested, reinforcing the role of such systems in strengthening energy security by reducing fossil fuel dependency and transport costs.
It also called for streamlining permitting for electric vehicle (EV) charging station installations and complementing financial incentives with non-financial incentives for EVs (e.g. low-emission zones and speed limits). To smooth the process, it recommended to fast-track permitting and subsidy support for sustainable aviation fuel (SAF) production projects, which can already demonstrate cost-competitiveness.
Strengthening Domestic & Regional Energy Pathways
In the long term, IRENA suggested promoting domestic and regional supply chain development for technologies like, energy storage, and energy infrastructure value chains to reduce import dependency and strengthen supply security.
It also called for facilitating hybridisation of projects to allow storage systems to be installed. IRENA also reccomended using existing renewable energy supplies or industrial connection points, while minimising grid connection queues by streamlining permitting.
It called for incentivising and supporting electrification in low- to medium-temperature process heating, where heat pumps or electric boilers can be adopted, as well as in steelmaking, where electric arc furnaces are gaining market share, and in the chemicals sector, where process electrification has been demonstrated successfully.
It also suggested developing targeted financing mechanisms for renewable-based mini-grids with battery storage, particularly in fuel-import-dependent and landlocked regions where exposure to fuel price shocks is highest.
Finally, it recommended making financial and subsidy support for the fossil fuel industry conditional on meeting renewable energy targets.
