The Polycrisis
Tim Sahay and Kate Mackenzie on how geopolitics has been driving a quiet revolution in clean tech, and how the energy transition is in turn reshaping world power.
The Polycrisis
03 | Demand Destruction | Fossil chaos and electric acceleration
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Why exactly is this 2026 energy shock so different from the 1970s & 2022 shocks? Kate and Tim discuss our current energy security landscape, and outline some of the arguments made in their recent Polycrisis essay, just published with Phenomenal World. They also look at whether it matters that financial markets are becoming re-enthused about renewable energy.
Hosted by energy and climate finance expert Kate Mackenzie, and Tim Sahay from the Net Zero Industrial Policy Lab at Johns Hopkins University. They co-author The Polycrisis newsletter, which explores connections between energy, geopolitics, climate change, finance and industry.
- Produced by Sarah Allely
- Original music by Russell Stapleton
- Mixed by Bethany Stewart
Contact us at: polycrisispodcast@gmail.com
Links:
Dawn of the Electric World Order: Global shockwaves from the war on Iran are accelerating the energy transition - The Polycrisis May 8, 2026
Investors pile into clean power as Iran war drives push for energy security - Financial Times, May 3, 2026
China's Green Tech Firms Target New Consumers Hit by Iran War Energy Shock - Bloomberg News, May 11, 2026
Chinese Electrotech is the Big Winner in the Iran War - Paul Krugman's Substack - April 14, 2026
Ember Global Electricity Review 2025 - Record renewables growth led by solar helped push clean power past 40% of global electricity in 2024, but heatwave-related demand spikes led to a small increase in fossil generation.
Welcome to the Polycrisis, where we look at our interconnected crises, the whole being bigger than the sum of its parts.
SPEAKER_00All the episodes for our first season, Electric World Order, are available and season two is in development. In the meantime, we have a special bonus season, Demand Destruction. Each episode we'll discuss the implications and the geopolitics of this energy crisis that's arisen from the war in the Middle East.
SPEAKER_01I'm Tim Sahai. I'm with Johns Hopkins University in the US, where I co-direct the Net Zero Industrial Policy Lab. I'm speaking to you from my home in New York City.
SPEAKER_00And I'm Kate McKenzie, a Sydney-based energy and climate finance expert. So let's start with our thoughts about why this 2026 energy shock is different from the 1970s and especially from the 2022 energy shock from when Russia invaded Ukraine. So it's a much bigger percentage that's being taken out of the market and it affects, I think, a bigger, a bigger part of the world. It affects the entire oil and gas markets a lot more profoundly than in 2022. Um, but going back to the 70s, I mean, in terms of the scale of the energy that's been, or if you just look at oil, right? It's like around 10% has been taken off if you net out what um you know Saudi Arabia's been able to divert through pipelines. Uh whereas the night the the shocks around 1979, I think it was about 4%. Um so this is obviously bigger, but that's that's not our only point, is it, Tim, about what's different now?
SPEAKER_01Yeah, I mean, what's different now is the supply, as you pointed out. And secondly, on the demand side, what's different is that we have superior electric technologies that are cheap and easy to get.
SPEAKER_00And many, many things have changed just in the last two or three months since this war commenced, um, which which already seem to be accelerating it far, you know, far more quickly. Um it seems like all of these are quite interconnected, right? So one is the availability of alternatives that obviously we didn't have any of this in the 70s or or the 80s. Um the you know, renewable energy existed, but it was so scarce, you know, so marginal, so much more expensive, um, just wasn't really feasible. All the measures that countries could take to reduce their dependence on oil uh from the those oil shocks around the 70s and early 80s were really things like changing industries in the case of Japan, um building nuclear power in the case of Japan and France, um, what else, you know, energy efficiency, changing car efficiency standards. So, and now there's this whole other set of things that can be done and and and are being done in terms of just like substituting the generation of energy with renewables and using storage to back it up and also changing the way that energy is consumed. So you don't need combustible fossil fuels, you can have an electrified energy system. I mean, that's that's mostly it, isn't it, Tim?
SPEAKER_01And and I remember, you know, after the 2022 um um Russian invasion of Ukraine, you had all of these sort of doom-laden predictions from everybody, right? Like gas is gonna come back, coal is gonna come back, and everywhere you looked at the news, there was these predictions. And and you know, they they were all just wrong, weren't they?
SPEAKER_00Yeah, and they were all presented as being the accepted wisdom. You know, it was just, it was, it wasn't even that it was stated really explicitly everywhere. It was just um, you know, it was just implicit. It was like, oh, this is gonna, you know, tough times, everyone's everyone's now seeing the urgency of actually securing fossil fuel supplies. I do think that point in 2022 was a bit different because it did throw the focus back onto fossil fuel supply availability, which had not been an issue for many years, because as we know, you know, the the the big boom in US shale oil production. Um this time though, we don't that we don't have that shock, right? Because Ukraine already Ukraine already did that. Instead, we've got all of these other countervailing forces, and one of them is the reluctance of most of the world now to rely on the US either as a direct supplier of fossil fuels or as a sort of guarantor of the safe passage of fossil fuels. The next thing is that governments are actually already taking a lot of measures to get away from fossil fuel dependence in a way that is permanent. So there's been a lot of parallels drawn to COVID, and you know, there have been measures like, oh, you know, work from home in, I don't know, Thailand. And I those are things that can be reversed pretty easily. There's a whole lot of other things happening that are not very likely to be reversed ever, right? Which is that electrification, um, that substitution of generation, um, changes in demand in the actual equipment that's using energy and the equipment that's that's making energy. And governments are actually kind of pushing that, but it's also, you know, it's not it's not just because governments are pushing it, right?
SPEAKER_01Yeah, there's this kind of like short-term response of just like conserve the fuel, we don't have enough fuel, we can't get enough out of Home Moose, so we just need to cut back and, you know, hence destroy your demand and shrink your economies because there's not enough fuel. But I think the most significant sort of the things that we're really looking at in that essay is what are the permanent kind of policies that governments are passing in the last two months to permanently electrify a particular end use? So you get rid of oil and gas forever. So if you just actually expand as the French have done, their subsidies for EVs and for heat pumps, those are two places, you know, cars and heating, that are never going to use oil and gas again. You know, similar policies have been passed uh across Europe because it's basically a fossil fuel importing sort of country. And the Spanish have passed similar things. And in Asia is where, you know, that's the place where I was really looking at, because Asia is like the place where everyone expected to stick with oil, gas, and coal, you know, for the next 20 or 30 years. And you've had these dramatic policy shifts that have been announced that I really don't think are being paid enough attention to, particularly in the Western press. But, you know, even Pakistan is just like, let's just like go all out on electrifying our two-wheelers and giving sort of more subsidies for electric bikes. The Indonesians have done the same thing. You know, the Vietnamese are trying to phase out their coal and saying we can't really uh renew our LNG, LNG contracts, as has Thailand. So, you know, these are these are permanent shifts, right? These are they're just never going to build out that fossil fuel infrastructure and are instead going to build out electrification.
SPEAKER_00Yeah. So these are all measures that have been announced or have come to light just in the last couple of months, right? Since the war started. Yeah, yeah, yeah.
SPEAKER_01And they've been they've been kind of tracked by people like Carbon Tracker or the Global Energy Crisis Policy Monitor that we linked to sort of in our essay. So these are really policies that have come out in the last couple of months.
SPEAKER_00Yeah, I I remember at the beginning of this war, Tim, you said that this is an energy crisis, this is particularly an energy crisis for Asia in the way that 2022 was particularly an energy crisis for Europe, right? But the difference is that Europe wasn't seen as a growth market for fossil fuels, um, for fossil fuel consumption, whereas Asia is, like Asia was kind of the big area of growth projection or growth demand projection for fossil fuels as well as, you know, perhaps Africa. Um, but you know, really Asia was seen as like, oh, this it's a region that just has insatiable demand for LNG, for example, and um and oil and oil refined products, because you know, vehicles or you know, cars, everything, this this is just going to grow, you know, they're they're all mostly kind of fairly fast-growing economies. Just the fact that it's in that it's Asia that's particularly dependent on Gulf oil and gas is is another factor that's like making this like very significant for the the global trajectory of energy.
SPEAKER_01Yeah, exactly. And Asia is also, you know, where half of the world's people live, right? So I mean, when you there's this, there's this sort of wonderful map that I've been using in that talk at Westland, which is, you know, you you kind of have a circle of about like 4,000 kilometer radius, and you draw that circle, you know, centered in Southeast Asia. And that circle includes most of Southeast Asia, China, India, and inside that circle, more people live inside that circle than outside that circle. And it's, you know, those Gulf oil and gas molecules are going largely to the people inside that circle, um, which is why this is this gigantic Asian, Asian crisis on on fuel and fertilizers and and oil and gas.
SPEAKER_00Look, something else that you found very interesting is this report um about lots of money flood flooding back into renewable energy investments, right? Into into ETFs, essentially, so renewable energy company equities um effectively. Um and I was a bit skeptical about how important this is, but reading some of the comments, it was a story in the FT. Um I I felt like a bit more persuaded. Anyway, do you want to do you want to tell us like why why you think this is important?
SPEAKER_01Because um Yeah, I mean, the the the title of that report in the FT is Investors Piling into Clean Power as Iran War Drives a Push for Energy Security. And, you know, all of my sort of like belts went off because that was basically the argument of our podcast, you know, that there's this new motivation of energy security um that is attracting uh governments that want to electrify and uh and so on. And and they have the numbers, right? So what the investors are basically seeing is demand is soaring. The the order books of those companies that make and sell um electric machines are soaring. And so investors want exposure to those companies that are going to do well. Um and the really striking thing was um these quotes from people who are, you know, heads, head of equity training at Society General, who is like, you know, this renewables bounce is actually an energy security trade. And it's investors that are pricing in the cost of relying on imported fossil fuels in a world that keeps bringing geopolitical surprises. And that's essentially an argument that, you know, you kind of have these geopolitical driven energy shocks, and that's what's driving people towards electrification. And then this other quote from this guy who's, you know, the chief investment officer for equity at an asset management uh company called Nordia. And he says, look, the agenda around clean technology in the past was driven by ESG sort of concerns, environmental, social, and governance concerns and you know, about climate change. But now, in Europe at least, it's about sovereignty and autonomy. And that's what's driving this huge investment cycle in Europe. And those are those are quotes that are really sort of telling you that investors are being attracted back into clean energy.
SPEAKER_00Yeah, so I I was a bit skeptical because you know, it's it's a bit harder to invest in renewable energy as such, like through equity, like through capital markets, in the way that you can invest in, say, oil or gas. Um so you know, it's like how how much does this really represent? Like, like what does this really represent, right? But like you said, like the actual comments, the people that were making those comments are were more like, you know, sort of fairly like high-level um people, and they seem to be expounding on a theory that, you know, this is like a secular trend, like this is a thematic thing that they're doing. Like rather than just kind of getting exposure to these particular companies or this particular sector, it's it's reflecting a bigger logic shift in how, you know, in in how the world is changing now. Um it's also really interesting in that story that it showed ETF inflows into um, I think of like a particular clean energy ETF, right, which is an exchange traded fund. So it's a way of you know piling into a bunch of of stocks all at once. Um and the biggest it the I think the most recent month they had was like the biggest inflow ever. Except there was one month that was bigger and it was around mid-2021. And I'm not sure exactly what happened then, but um, I guess that was probably the moment when like climate, the kind of climate finance enthusiasm vibe was like peaking. Um so yeah, it's really interesting to see that like this is we're seeing that kind of surge again, but like with a completely different rationale.
SPEAKER_01Yeah, exactly. Electrification is now a drive for autonomy and security, and you know, a bunch of rich countries, particularly in Europe and East Asia, are now rolling out policies to encourage investment in these areas. So, you know, any investor is like scared about the future, right? Investors are always worried about is this thing going to make me money over the next 10, 15 years? And so that's why, you know, government direction, is this gonna be a stable policy towards electrification? Are you gonna support me on solar, wind, batteries, et cetera, for the next 10 or 15 years? That's what people are looking for. And so if you're getting a bunch of these big asset managers getting back into clean energy and they explicitly cite that, look, it's now clear that we are gonna get more and more energy shocks, and therefore we know governments are gonna react in this way by pushing electrification, that's a huge shift.
SPEAKER_00Yeah, it's interesting to me to just put it alongside all of this um acceleration in, you know, and we we don't really go into like the defense industry very much at all, but clearly there's been like a lot of investment money going in that direction to um not just not just this year, but you know, over the last um 18 months or so and lots of IPOs or you know, uh possible IPOs coming up in that sector. And yeah, I think it'll be interesting to see whether that kind of you know, m market money, like capital market money is actually gonna make a material difference to the renewable energy sector because you know, as we've said so many times, like a lot of the actual manufacturing of clean tech, um clean energy gear is in China. And, you know, there's like some of that is equity financed, I guess, in China, but but you know, it's it's also like it's very state-led, right? And the finance is very different.
SPEAKER_01But anyway, we'll just to get back onto I was I was really looking forward to how much of it is Chinese companies whose shares are going up, and how much of it is European and other Asian countries whose shares are going up. And it was very pleasantly surprised to see, you know, Siemens Energy from Germany's shares are up 50%, Nordic's Spain's renewable um energy companies are uh sea owner, all of them are up 30, 40%. And the Chinese companies are also up, but those are Chinese private sector giants in, you know, whose stocks you can invest in. So the CATLs and BYDs, et cetera, their share prices have also been sh been soaring. But I really think it's that kind of underlying thing of is there going to be demand for these products? Are they are these companies gonna do well? Are they gonna sell more units? And secondly, is government policy going to be supporting it or not? And if you're an investor and you ask those two questions and you look at the signals, the same signals that we've been looking at, and you just go, yep, it's happening. It's on. Let's get into it.
SPEAKER_00Yeah, I okay, so this is kind of related to one of our other key points. And this was originally your phrase, but I've kind of like come to um adopt it as well. You know, I was a little bit skeptical at first, which is the hyperagency of consumers. Um, and okay, so you talk about that, and then I want to talk about like how this is different to previous like bottom-up energy transition waves that we've seen.
SPEAKER_01Yeah, I mean, consumers are just de-risking from fossil fuels. They want something that works, you know. They're like my mom running out on Amazon.com and buying her electric induction stove, you know, two days into the war. And so there's this kind of, I mean, I don't want to call it animal spirits, but it is something like something scary just happened. There's no more oil and gas that's gonna come. And there, you know, at the end of the day, we are animals that respond to fear and uncertainty and say, wait, what do you mean I'm not gonna have cooking gas from next week? Or what do you mean like my car bill is gonna shoot up by 50% because of this war? And so people just react. And the reaction is just like calling up, you know, the neighborhood EV dealer. And that's bottom up. That's just driven purely by kind of animal spirits. And investors and governments are basically responding to what consumers did. And in in many ways, this kind of reminds me of March and April 2020 when people started to get scared of the virus and started to act before any government policy happened and started to avoid crowded places and closed places. And it's only later that you had government action, you know, in the next couple of months. And so I think this is this is really why I started to think about the hyper-agency of consumers acting purely out of sort of animal spirits.
SPEAKER_00Yeah, and I was a bit skeptical about this at first. And I think the reason for my skepticism was that I was thinking about, you know, again, as we've mentioned, I live in Australia, there's lots of rooftop solely. And yet for years that didn't particularly change the electricity system here. You know, there was a lot of a lot of it was dependent on feed-in tariffs, and it was very policy-dependent and and so forth. Um, but I think like some things have changed where these items have become so much cheaper and so much easier to get for a start that it's that it actually does change the system. You know, it does change the demand dynamics uh with things like yeah, I think induction cooktops, EVs, and heat pumps are like three examples of where electrification is coming in on the demand side and it's not going to reverse. And that's that's something we haven't seen before. Um and we haven't seen it like at this scale or at this like with this lack of policy support. You know, it's not really dependent on what governments are doing. Um, okay, to some extent, heat pumps for sure in Europe. I think that's where I started to, I've I've started to feel like more convinced at this that actually, you know, bottom-up, consumer-led changes in the energy system can actually happen. And we're probably seeing that start happening now.
SPEAKER_01Yeah, I mean, I I kind of resist this idea of to sort of bottom up versus top down. I think, I think the basic idea is something dramatic has shifted in the last few years, which has literally never happened before, which is that clean technology has become cheaper and more available than fossil fuels.
SPEAKER_00Something else that's just starting to emerge that I want to mention, um, and you know, being aware that this is all, you know, things are changing very quickly, um, is that I we've made the point a couple of times that China, Chinese companies, you know, Chinese EV companies, solar power manufacturers, whatever, haven't actually been um that proactive in terms of expanding um and it particularly with it on the energy generation side into other countries, right? So it hasn't been like, or I should say the Chinese state hasn't been that active in supporting them, in building new markets, in you know, changing the entire generation systems in in other countries in the way that you might expect. But um so I just saw a story in Bloomberg very recently about uh a Chinese EV company, Cherry, bringing a bunch of Canadian uh auto dealers over to the Shanghai Auto Show, um, which also like seemed to get a lot of coverage. Um, and you know, a Chinese solar manufacturer making a big deal with uh a Nigerian energy, sorry, a big uh Nigerian conglomerate for like 500 megawatt uh clean energy installation. And yeah, it's interesting that there's signs that there is more, like there is a lot more kind of, I guess, proactiveness from the China side in terms of going out and and you know, expanding, like systematically expanding their footprint in other countries, um, which will, you know, inevitably get us eventually onto the topic of like where the manufacturing is done. But yeah, I thought I think that's that seems like another kind of like leading indicator of how things are are really kind of changing in a permanent way.
SPEAKER_01Yeah, I mean, this this to me has been sort. Of one of these things that you absolutely don't see if you're living in America, which I am. And it required me to travel outside America last year after Trump was elected. You know, I was doing my work with the lab in Brazil and Mexico, you know, traveling to Europe, traveling to India. And what you essentially see is a Chinese presence, both of products and of factories. So everybody thinks about the products. Yeah, Chinese products are obviously everywhere, and you can buy these EVs and solar panels and what have you. But the really interesting thing to me was, you know, traveling to you know northern rural Brazil in Bahia and in Pernambuku and finding big construction companies, big new factories being made, you know, new train lines being made, transmission lines being made, and a lot of like actual just work happening, you know, not in just the big cities, but in small places. And that then led me to ask this question wait a second, is this just Brazil? Or is this actually happening everywhere? And we were just shocked at something like 450 new Chinese factories being built outside China. You know, in Brazil, in America, in Europe, a huge amount in Southeast Asia. And that is very recent. It's a story of the last four years. And I wonder where it goes um after 2026. You know, is the government gonna support these companies or these companies just gonna do these building out factories elsewhere?
SPEAKER_00I don't know exactly how it's gonna play out, but I think we can be pretty sure that like we're not gonna go back to this old energy system now. Um, you know, no, very few countries want to increase their dependence on the US, like we're saying. Very few of them want to increase their dependence on oil and gas markets now that it's been demonstrated so clearly how much of a vulnerability they are. Um actually, I just want to mention quickly also this one one of the ideas, you know, I I think one of the things that we did in the essay was also like push back on some of the counter-arguments or just explore some of the counterarguments and push back on them. Um I think one thing that we didn't look at was this argument that, oh, you're just swapping out one dependency for another, like, oh, if you import gear from China, um, aren't you just increasing your your um your dependence on China? And I even saw a report saying, oh, you know, you're just swapping one choke point for another choke point. I I don't understand this argument though. It just um like I you know, I I appreciate the concern there, but you're you're installing equipment that doesn't need to be renewed. It's not like you need these monthly imports. So it's it's really not an equivalence at all. Like it's very different. It's a you know, it does introduce a vulnerability, but it's such a different one, right? And it's so much less it it's so much less risky in an ongoing way.
SPEAKER_01Yeah, the ongoing aspect is a critical one, right? Once you've bought that EV or once you have bought that solar panel, it produces electricity.
SPEAKER_00Yeah, and so one of the very last things to mention, um, another argument that we argue against is this idea that um this war is going to increase the dominance of US oil exports and US gas exports or you know, LNG exports in particular. I just don't think we're really seeing that. I think we'll see it, you know, obviously there's a short-term increase in you know, demand for shipments from the US because shipments can't get out of the Gulf and the US is the biggest oil exporter and the biggest LNG exporter now. But I think the thing that is significant is um LNG long-term contracts. Um, US would like to have more long-term LNG contracts. Most of their LNG is sold um in the in the spot market, whereas Qatar and Australia, other really big exporters, have these, you know, decades-long contracts, sauna. Um but we don't seem to be seeing more of these contracts being signed with the US at all. In fact, um Totale Energy, which is a French company that is actually quite big in US LNG exporting, on their earnings, quarterly earnings call. Just recently, their CEO said, Oh, you know, we're seeing the view of LNG being questioned from customers in Asia. And he said, Oh, you know, that's why we want to get them on uh that's why we want to promote to them the idea of long-term contracts. That seems like a very revealing comment to me, you know, that we've we've already seen some reports, some reporting saying that in Asia the sentiment towards LNG is already changing and it's no longer seen as a big part of the energy future there the way that it was before the war. To be hearing it from the the side of the US exporters kind of saying it out loud, um, I think that's really telling.
SPEAKER_01Yeah, and goes back to this whole question of if you create a huge amount of uncertainty in a market, governments hate uncertainty, consumers hate uncertainty, and at the end of the day it's demand that is king and demand that that decides whether these you know multi-billion dollar investments in gas will will ever go ahead.
SPEAKER_00Yeah, and they're very big commitments, right? They're decades long, and once you sign those contracts, they're they're very hard to get out of. Okay, you've been listening to episode three of our bonus season of the polycrisis. I'm Kate McKenzie.
SPEAKER_01And I'm Timsa High. We publish a newsletter about the political economy of climate change, amongst other things. You can sign up for that and find out more about us at thepolycrisis.org or in our show notes.
SPEAKER_00Our producer is Sarah Allerly, Russell Stapleton composed our music, Bethany Stewart is our sound engineer, and Sarah Allerly is also our executive producer.