Recent analyses reveal that renewable energy sources, particularly solar and wind power, have significantly buffered the global economy against the severe energy crisis initiated by the ongoing conflict involving Iran. Despite fears of a resurgence in coal usage, new data indicates a remarkable shift towards clean energy solutions that are reshaping the energy landscape.
Solar and Wind Power Surge Amidst Geopolitical Tensions
In the wake of the US-Israel conflict with Iran, which has led to the blockade of the Strait of Hormuz, the energy sector has encountered substantial turmoil. However, a study released by the Centre for Research on Energy and Clean Air highlights that the anticipated spike in coal consumption has not materialised. Instead, record levels of solar and wind energy production have compensated for the decline in gas-fired power generation.
In March, global fossil fuel power generation saw a 1 per cent decrease compared to the previous year. Notably, outside of China, coal-fired generation dropped by 3.5 per cent, while gas-fired production decreased by 4 per cent. In stark contrast, solar energy generation rose by 15 per cent, and wind energy saw an increase of 7.6 per cent. Interestingly, no coal plants were reactivated or had their retirements delayed during this period, contradicting earlier projections of a coal resurgence.
Coal Trade Declines Despite Regional Pressures
Further insights from Bombay Strategy, leveraging Kpler shipping data, reveal that global coal imports in March hit a five-year low, plummeting approximately 7.6 per cent year-on-year to 102.8 million tonnes. This trend defies the narrative of a “coal comeback” that gained traction following announcements from countries like South Korea, Japan, and Thailand to extend coal plant operations amid gas shortages.
Although nations such as India requested coal plants to operate at maximum capacity, and both South Korea and Japan lifted restrictions on coal-fired generation, the overall impact on coal generation was minimal. Lauri Myllyvirta, lead analyst at the Centre for Research on Energy and Clean Air, noted that these measures would only yield a modest increase in coal generation—between 1-2 per cent in each country—largely disconnected from the current geopolitical crisis.
The Structural Shift Towards Clean Energy
The data indicates a significant structural change in global energy generation. Unlike previous oil crises, when the world rushed to coal as an economically viable alternative, the current situation is markedly different. Following Russia’s invasion of Ukraine, coal shipments surged temporarily; however, the recent blockade has led to a reduction in coal trade volumes. Hozefa Merchant, global energy lead at Bombay Strategy, remarked that the global response to LNG shortages has evolved, with a notable increase in renewable energy capacity mitigating the need for coal.
Since 2022, the world has added over 2,000 gigawatts of renewable energy capacity, resulting in an estimated 1,100 terawatt-hours of electricity generated in 2025 alone. This output is approximately double the volume of LNG that passed through the Strait of Hormuz prior to the blockade, showcasing the efficacy of clean energy in addressing current energy challenges.
The Future of Energy Amid Crisis
Despite the positive trends in renewable energy, the crisis has not left the power sector entirely unscathed. In China, coastal provinces have seen a shift from gas to coal, albeit limited due to gas constituting only 3 per cent of overall electricity generation. Countries reliant on LNG, such as Malaysia and the Philippines, have reported increases in coal imports, while Pakistan has also experienced a rise from a low baseline.
As the situation evolves, Merchant cautions that the data from March represents an early snapshot, and the potential for fluctuations remains. Nevertheless, Myllyvirta emphasises that the current structural dynamics are unfavourable for new fossil fuel investments, which typically require years to develop.
With the eventual reopening of the Strait of Hormuz, accelerated clean energy initiatives are likely to have diminished fossil fuel demand, resulting in an oversupplied global market—a precarious environment for investment in traditional energy sources.
Why it Matters
The ongoing energy crisis underscores the critical role of renewable energy in shaping a resilient energy future. As nations face geopolitical uncertainties, the robust growth of solar and wind power not only mitigates immediate energy shortages but also paves the way for a sustainable transition away from fossil fuels. This development highlights a pivotal moment in the global energy landscape, where investments in clean energy could fundamentally alter the response to crises and promote long-term energy security.
