In a world perceived as increasingly volatile, uncertain, complex and ambiguous, simple concepts (such as VUCA) can be useful to make sense of the complexity. “Polycrisis” is one such example, first appearing in the 1990s to mean “interwoven and overlapping crises” facing humanity. Now it has been popularised by the 2023 World Economic Forum Global Risk report to refer to the interrelated environmental, geopolitical and socioeconomic risks to the supply of and demand for natural resources by 2030.
The power market sector finds itself at the confluence of multiple crises: a cluster of environmental challenges, a cost-of-living crisis, supply chain disruption post-COVID-19, and geopolitical tensions.
Yet when it comes to risk management and strategic decision making, perhaps a more helpful concept is that of the “energy trilemma”, which neatly and timelessly summarises the tensions that this sector is subject to when trying to find a balance between security, affordability, and sustainability.
The last 18 months have shown how this balance can be impacted by geopolitical events, with different countries making different decisions to resolve their energy trilemma.
A reminder that energy and geopolitics are intricately linked was the well-reported presence of Dr Fatih Birol, the director of the International Energy Agency at the last G7 summit in Hiroshima in May 2023. He outlined recommendations for a “clean” energy world, to avoid the same geopolitically driven energy security risks that have become part of the global energy landscape since the 1970s around oil and gas.
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|The polycrisis and the energy trilemma: the geopolitical risk landscape in 2023