Iran War Accelerates Global Energy Shift, But What Kind?

energy transition –

Have recent disruptions in the Gulf left countries choosing quick fixes over cleaner futures?

Regional responses and coal rebounds
Across Asia and beyond, policies meant to curb oil and gas use are being paired with a sharp, if messy, uptick in coal. Thailand’s national electric utility — the Electricity Generating Authority of Thailand (EGAT) — has ordered the restart of 0.6 GW of coal power. South Korea, which is looking to subsidize public transit to curb gasoline demand, lifted caps on generating electricity from coal. Japan is now allowing less-efficient coal plants to feed power into the grid so as to offset demand for gas, which supplies about a third of the country’s energy demand. In India, where electricity usage is surging to record highs, coal usage could meet a record 283 GW of demand as temperatures continue to rise. Even as China rapidly expands renewables capacity, it has been firing up a vast fleet of coal plants that had been running well below capacity.

These steps expose a tension: meeting immediate demand and protecting consumers often trumps longer-term emissions goals. Coal prices are rising as demand spikes, and large regional producers such as Indonesia are signaling they will prioritize domestic customers over foreign buyers, adding another strain to global markets. Shelling out to keep aging coal plants online isn’t exactly a long-term solution, though; the economics are shifting even as policymakers weigh short-term risks.

Renewables, economics, and strategic choices
The falling cost of solar panels produced by China has made renewables more attractive despite relatively high up-front costs for larger projects. Pakistan offers a striking example of how that can play out: the country now generates roughly 30 percent of its energy from renewables, up from just 3 percent in 2020. Since 2023, Pakistan has imported a whopping 41 GW worth of solar panels from China. A recent report found that Pakistan had avoided more than $12 billion worth of oil and gas imports between 2021 and February 2026.

Policymakers now face a practical question: prioritize short-term fuel security or accelerate infrastructure and storage investments that would reduce reliance on volatile imports.

As even longtime U.S. allies scramble to secure deals with Iran to allow tankers to pass through the Strait of Hormuz, more countries could sour on the idea that relying on fuel imports from either the U.S. or the Gulf is a realistic way to meet their growing economies’ energy needs. The conflict is accelerating some kind of energy transition, but the form it takes is shaped by urgent power shortages, political calculations, and the immediate cost of keeping lights on.

That dynamic suggests the transition underway is uneven. In many places, the most accessible option to shore up supply has been coal, even while renewables become steadily cheaper and technically viable. The net result is a patchwork shift in which countries move away from dependence on certain fuels without necessarily advancing the cleaner, more resilient systems climate advocates have argued for.

Finding a durable path forward will require blending short-term resilience measures with sustained investment in wind, solar, storage, and transmission. Only by marrying immediate security with long-term planning can governments avoid locking in higher emissions while also reducing vulnerability to geopolitical shocks.