Key points

• Energy security remains an ongoing challenge, particularly in the face of escalating geopolitical tensions and the emergence of inward-focused domestic industrial policies.
• Renewables are set to assume an increasingly prominent role as the Quad economies position themselves for energy transitions and strive for low-carbon, resilient growth.
• The extraction and processing of critical minerals, essential for facilitating a green energy transition, exhibit significant geographical concentration elevating the vulnerabilities within the energy landscape.
• The growing digitization of the energy sector is undeniably crucial; however, it also exposes the sector to increasing security and privacy risks.

Policy recommendation(s)

• The Quad should actively encourage collaborative technology development and transfer to mitigate the potential hazards of supply chain monopolization and future disruptions. Incorporating digital resilience into both technology research and development initiatives will be critical.
• The Quad should strengthen sector-specific partnerships aimed at harnessing synergies and enhancing clean energy capacity, production, and distribution.
• The Quad should strive to extend the scope of the Quad Plus framework to facilitate synergies and to avoid getting overshadowed by conflicting and competitive actors in the Indo-Pacific region
• The Quad should aim to harmonize global green policies and uphold the principles of equity and justice as central tenets of the just energy transitions agenda.

The Landscape of Energy Insecurity

• Over the recent years, a series of significant geopolitical and economic factors have profoundly impacted the energy landscape, disrupting two decades of booming energy supplies and utopian visions of a green future. The Covid-19 pandemic disrupted some of critical energy supply chains, which are still struggling to recover in the aftermath of the crisis. The recent invasion of Ukraine further constrained energy flows from Russia, adding to the complexities of the energy landscape. These developments have far-reaching implications for the global energy sector, especially salient in the context of the Quad given their status as four major economies of the world. And as these economies prime themselves for rapid clean energy transitions, the question of energy security has never held more fragility and relevance. The new age of energy insecurity is increasingly shaped by countries looking inwards and devising domestic climate policies, most notably, the landmark climate legislation passed by Washington called the Inflation Reduction Act and Europe’s Green Deal industrial plan.^[1] The illusion of increased self-sufficiency may render a false and temporary sense of resilience, yet an interconnected global energy system must remain the cornerstone of an energy-secure world order. The illusion of increased self-sufficiency may render a false and temporary sense of resilience, yet an interconnected global energy system must remain the cornerstone of an energy-secure world order.

• Fossil fuels, namely coal, natural gas and oil continue to remain the dominant sources of energy among the Quad countries. Developed nations and emerging economies alike heavily rely on these resources for electricity generation, transportation, and industrial processes. The Indo-Pacific region account for almost 60 percent of the world’s GHG emissions and houses some of the world’s most vulnerable countries to climate change.^[2] The rising incidence of global climate crises and the concomitant international pressure to curb GHG emissions will engender widespread energy insecurity and economic instability if countries do not pave the way to clean and resilient energy supply chains urgently. As signatories of the momentous Paris Agreement,^[3] there is a significant push for renewables and non-fossil fuel energy production among the Quad countries. With the recent surge in renewables, such as solar, wind, hydro, and geothermal, Quad countries are proactively integrating these clean energy sources into their energy mix. This shift is driven by remarkable technological advancements and the declining costs of renewable technologies. USA, Japan and Australia have committed to net-zero targets for 2050 and India targets 2070 for the same. Each of the Quad countries has set ambitious interim emission reduction targets below 2005 levels by 2030, and inevitably renewables will play a central role in realising these commitments.^[4]

• Critical minerals and rare earths are crucial ingredients for clean energy proliferation at scale. And the concentration of these resources in a few countries presents significant geopolitical risks. Australia provides 50% of the global lithium supply, and the Democratic republic of Congo and China are leading suppliers of cobalt and rare earths respectively, each accounting for 70 percent of those resources. The concentration is even higher in the processing and refining of these minerals, with China currently handling approximately 60% to 90% of these activities. ^[5] In contrast, the world's largest oil supplier, Saudi Arabia, contributes less than 15% of the global oil supply.^[6] Given this context, achieving diversification in the sources of clean energy components, especially critical minerals, will present an even greater challenge. Adding to this complex scenario, the recent imposition of licensing requirements by China on the exports of niche metals gallium and germanium has also raised serious concerns about the potential derailment of global clean energy transitions. These metals are essential components in various clean energy technologies, including solar panels and semiconductors. According to the U.S. Geological Survey, the US GDP growth will suffer a 2-percentage point drop with only a 30 percent fall in supply of gallium to US companies. This is equivalent to the economic hit taken by Europe with Russia’s gas embargo.^[7] China's near-monopoly of existing clean energy supply chains and its willingness to exploit crucial energy elements and resources for geopolitical advantages pose a significant threat to a rapid global green transition. This case also serves as a compelling illustration of the increased susceptibilities within today's energy landscape.

• Oil and gas enterprises have traditionally employed digital technologies to model exploration and production assets. Digitalization is currently bolstering the safety, productivity, accessibility, and sustainability of energy systems. For instance, digital technologies can be instrumental in tracking air pollution or ensuring grid stability and reliability by optimally balancing energy demand and supply as well as improve plant and network efficiencies.^[8] While substantial potential lies in utilizing digitization for energy, there also exists pressing challenges pertaining to security and privacy risks. The expansion of the Internet of Things (IoT) is amplifying the potential "cyber-attack surface" within energy systems.^[9] As the clean energy sector becomes increasingly digitized and powered by electricity, it will face an escalating risk of cyber assaults. Effective measures will require collaboration between private enterprises and governmental bodies to prevent and address incidents like the 2015 cyberattack that disrupted significant portions of the power grid in western Ukraine.^[10] Privacy and data ownership will represent significant concerns for consumers as increasingly detailed data is gathered from a growing array of interconnected devices and appliances. Additionally, digitalization is influencing employment and skills across various energy sectors, reshaping work patterns and employment activities.^[11]

Quad’s Role in Strengthening Energy Security and Clean Energy Supply Chains in the Indo-Pacific

The Quad nations recognise the importance of reducing dependency on fossil fuels in the interest of both energy security and addressing climate change and have collectively committed to making resilient clean energy supply chains a key agenda priority. This section provides recommendations to strengthen the Quad’s role in this regard.

Promote Technology Co-Development and Transfer

As demand for renewables technology and associated critical minerals rise in the future, it is important to foster collaboration among jurisdictions to enhance cost optimization, stabilize pricing and most importantly ensure that the technologies serve the needs of all countries. Technological innovation and key critical minerals are often geographically concentrated, and therefore, cross-country collaborations can help build joint capacities which will reduce the risk of supply chain monopolization and future disruptions.^[12] The Quad can be instrumental in forming networks of top-class innovation labs with representation from the grouping and other member countries in the Indo-pacific. Furthermore, it can facilitate joint ventures between private companies to this end. These efforts will also serve as an opportunity to promote green entrepreneurship and bring within the fold SMEs engaged in innovative green solutions. Technology transfer will be equally critical, for instance, India recently discovered almost 6 million tons of lithium within its jurisdiction but may take up to 20 years to build the necessary capacities for extraction without urgent technological support.^[13] Moreover, it is important to incorporate digital resilience into both technology research and development initiatives, while at the same time bearing in mind the policy and market frameworks, in order to address the security and privacy risks discussed in the previous section.^[14]

Establish Sector-Specific Partnerships

In 2021, the grouping announced the ‘Quad clean-hydrogen partnership’ to scale production, boost demand, and reduce costs for hydrogen supplies. Similarly, the USA and Australia founded the ‘Energy Resource Governance Initiative’ in an effort to improve critical mineral supply chains.^[15]  At the G20 Energy Ministerial this year, India proposed the Global Biofuel Alliance to accelerate sustainable biofuel deployment which serves as yet another notable example.^[16] Similar sector-specific partnerships on cooling, decarbonizing freight transport, minimizing methane emissions in the natural gas sector, fuel ammonia etc. are far more effective in drawing synergies and fostering collaboration among countries to boost clean energy capacity, production and flows.

A Broader Quad Plus Framework

China’s diplomatic inroads in Solomon Islands serves as a compelling reminder to bolster to bolster relationships with countries in the Indo-Pacific. Strengthening these ties is crucial to promote mutual interests and prosperity in the region. Including other countries will strengthen the plurilateral nature of the Quad and help draw complementariness and synergies in pursuing shared goals. India and Singapore have joined hands in connecting their power grids through undersea cables which will allow India to sell renewable energy to the latter.^[17] This is in line with the mandate of the International Solar Alliance and its One Sun, One World, One Grid (OSOWOG)  initiative.^[18]  Enabling grid connectivity among countries in the Indo-Pacific as well as Africa, where energy demands are projected to rise significantly in the future, holds immense potential in ensuring energy availability, access, affordability, and sustainability across the region and beyond. By fostering interconnectivity and collaboration in the energy sector, particularly on power grids, countries can leverage their diverse energy resources to meet growing demands and address common energy challenges collectively. The International Solar Alliance (ISA), led by India and France, can play a pivotal role in spearheading these efforts to facilitate dialogue, knowledge sharing, and investment in clean energy infrastructure. To draw out an analogy, the five member BRICS grouping invited six more countries to join the alliance as permanent members in the spirit of strengthening multipolarity and fostering Global South collaboration on common challenges.^[19]

Harmonize global green policies and ensure just energy transitions

The Indo-pacific is home to many countries disproportionately vulnerable to climate change and energy supply disruptions. For instance, the COVID-19 pandemic's impact on freight rates was particularly pronounced on trade routes to developing regions in the Indo-Pacific.^[20] As global economies prime themselves to transition towards green and clean sources of energy, the principles of energy equity and justice must remain central to the energy transition agenda. The Quad may consider instituting reconceptualized Just Energy Transition Partnerships (JETPs) which are not limited to coal phase downs but instead focus on sectoral transformations by investing in project-based/sector-specific activities including cooling, decarbonizing long haul freight transport, electric vehicles etc.^[21] Furthermore, the Quad must leverage its collective powers to hold dialogue, promote cooperation and harmonize the green policies of Western economies such as Europe’s Fit-for-55 plan which includes Carbon Border Adjustment Mechanism (CBAM), as well as the U.S. Inflation Reduction Act. For instance, the former seeks to tax imports of carbon-intensive hydrogen while the latter proposes to offer substantial subsidies of three dollars per kilogram of green hydrogen, providing a domestic competitive advantage that threatens to undercut low-cost producers in other countries. To this end, the Quad may consider establishing a more collaborative Global Green Hydrogen Alliance to strengthen cooperation and ensure fair competition. ^[22] Furthermore, long term concessional financing will be critical for economies in the Indo-Pacific on their journey towards decarbonization. The Quad could perhaps undertake a reexamination of risk-rating metrics that have so far burdened Global South nations with a premium on capital stemming from biased country risk perceptions. ^[23]

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This is a slightly expanded version of an article that was first published in October 2023, as part of the Quad Tech Network Series of the Australian National University’s (ANU) National Security College. The original article can be found here: The energy quest: elevating the Quad’s role in the Indo-Pacific | Crawford School of Public Policy (anu.edu.au)

Endnotes

^[1] Jason Bordoff and Meghan L. O’Sullivan, The Age of Energy Insecurity, How the Fight for Resources Is Upending Geopolitics, Foreign Affairs, April 10, 2023

^[2] M Woods, ‘Clean-Energy Supply Chains in the Indo-Pacific: Prioritizing the Quad’s Role’, Institute for Security and Development Policy, 2022, accessed 2 August 2023.

^[3] United Nations, Paris Agreement [PDF 4.3MB], United Nations, 2015, accessed 2 August 2023.

^[4] M Woods, ‘Clean-Energy Supply Chains in the Indo-Pacific: Prioritizing the Quad’s Role’, Institute for Security and Development Policy, 2022, accessed 2 August 2023.

^[5] Jason Bordoff and Meghan L. O’Sullivan, The Age of Energy Insecurity, How the Fight for Resources Is Upending Geopolitics, Foreign Affairs, April 10, 2023

^[6]  Alexandra Twin, The World's 10 Biggest Oil Exporters, Investopedia, updated July 28, 2023

^[7] A Demarais, ‘China’s Threat to Ban Critical Minerals Exports Is a Bluff’, Firstpost, 27 July 2023, accessed 2 August 2023.

^[8] International Energy Agency, Digitalization &Energy, November 2017

^[9] International Energy Agency, Digitalization &Energy, November 2017

^[10] Jason Bordoff and Meghan L. O’Sullivan, The Age of Energy Insecurity, How the Fight for Resources Is Upending Geopolitics, Foreign Affairs, April 10, 2023

^[11] International Energy Agency, Digitalization &Energy, November 2017

^[12] A Tyagi, D Warrior, D Agarwal, H Mallya, K Ganesan, R Jain, R Patidar and S Bhaduri. ‘Developing Resilient Renewable Energy Supply Chains for Global Clean Energy Transition’, Council on Energy, Environment and Water, 3 April 2023, accessed 2 August 2023.

^[13] Arunabha Ghosh, Can India Become a Green Superpower?, Foreign Affairs, June 20, 2023

^[14] International Energy Agency, Digitalization &Energy, November 2017

^[15] M Woods, ‘Clean-Energy Supply Chains in the Indo-Pacific: Prioritizing the Quad’s Role’, Institute for Security and Development Policy, 2022, accessed 2 August 2023.

^[16] International Energy Agency, IEA shares recommendations for the Global Biofuel Alliance at G20 Energy transitions Ministerial Meeting, IEA website, 24 July 2023, accessed 2 August 2023.

^[17] S Samant, ‘India in talks to link grid with Singapore to trade in green power’, The Economic Times, 30 July 2023, accessed 2 August 2023.

^[18] International Solar Alliance, ‘OSOWOG’, ISA website, n.d., accessed 2 August 2023.

^[19] Explained Desk, ‘BRICS gets six new members: Significance, what it means for India’, Indian Express, updated August 25, 2023

^[20] A Tyagi, D Warrior, D Agarwal, H Mallya, K Ganesan, R Jain, R Patidar and S Bhaduri, ‘Developing Resilient Renewable Energy Supply Chains for Global Clean Energy Transition’, Council on Energy, Environment and Water, 3 April 2023, accessed 2 August 2023.

^[21] S Saran, ‘The just transition framework is unjust’, Observer Research Foundation, 1 May 2023, accessed 2 August 2023.

^[22] Arunabha Ghosh, Can India Become a Green Superpower?, Foreign Affairs, June 20, 2023

^[23] Nadia Ameli et al., "Higher cost of finance exacerbates a climate investment trap in developing economies," Nat Commun 12, 4046 (2021), https://www.nature.com/articles/s41467-021-24305-3#citeas

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