The shifting geopolitics of energy: implications for the EU and its businesses

Energy has always been an important aspect of geopolitics, as traditional energy sources like coal, oil, and gas are inherently tied to geographical location. Access to these deposits has historically shaped global power dynamics, driven economic growth, and sustained political regimes. Control over fossil fuel reserves has provided certain states significant leverage—a reality the EU experienced firsthand when the withdrawal of Russian oil and gas triggered an energy crisis.

This wake-up call has placed energy security at the core of the EU’s new strategic agenda. Accordingly, the energy transition – shifting from fossil fuels to renewables – is no longer just an environmental goal but a geopolitical necessity. For the EU and its businesses, this shift brings both opportunities and challenges, requiring a balance between securing energy supply, strengthening strategic autonomy, and adapting to an increasingly complex geopolitical landscape. In this article, you will discover how these evolving dynamics shape the EU and its businesses.

From fossil fuels to renewables: a geopolitical shift

The energy transition seeks to reduce dependence on fossil fuels for energy production by shifting towards more sustainable sources, including renewables like wind, solar, and hydro, as well as nuclear power. Beyond its environmental benefits, this transition is increasingly seen as a tool for strengthening energy security—now one of the main priorities under the current Polish Presidency of the Council of the European Union.

Energy security means ensuring a reliable, affordable, and sustainable energy supply, a concern that has become more pressing in the face of geopolitical tensions and market instability. European Commission President Ursula von der Leyen has emphasised this in her political priorities, highlighting the need to combat high energy prices, counter “Putin’s energy blackmail” and “China’s monopoly on raw materials,” and stay competitive in the “race” towards climate neutrality.

In a world where fossil fuels are dominant, global energy power dynamics heavily favor resource-rich countries, as import-dependent countries are more vulnerable to supply chain disruptions, price volatility, and political leverage. While the EU possesses some domestic energy resources, it is not self-sufficient and relies on energy imports to meet its demand. The risks associated with this dependency became extremely apparent when Russia invaded Ukraine, and the disruption of access to Russian oil and gas triggered an energy crisis across Europe.  Businesses faced extremely high energy costs, forcing industries to scale back production or shut down operations, while consumers struggled with skyrocketing electricity and heating bills. Supply chain disruptions also hit key sectors, from manufacturing to food production, which led to great economic uncertainty. This crisis intensified the EU’s focus on achieving strategic autonomy, meaning it wants to make independent decisions and take action in important areas such as policy, security, and economics without relying on external actors or influences.

However, now that the EU is scaling down its dependency on Russian oil and gas, it is increasing its reliance on other countries, such as LNG imports from the United States. In the first half of 2024, 47% of the EU’s LNG supply came from the US. The new Trump administration could leverage this dependence or impose tariffs on LNG, which again would lead to higher energy prices for businesses and households in Europe.

The move to renewable energy reshapes these traditional power dynamics. Unlike fossil fuels, renewable energy is decentralised, multipolar, and technology-driven. Wind turbines, solar panels, and hydropower plants can be built in many places, which reduces the need for cross-border energy imports. However, to fully unlock their potential and stabilise prices, this transition must be supported by sufficient storage capacity, interconnectors, demand response mechanisms, grid modernisation and flexible energy markets. Without these, energy prices can become highly volatile – at times turning negative – which may force power producers to scale back production, delay investments, or even exit the market if selling at a loss becomes unsustainable. The energy transition also brings new geopolitical challenges, particularly regarding control over clean energy technologies and access to critical minerals essential for manufacturing renewable infrastructure. Let’s take a closer look.

The role of critical minerals in the geopolitics of energy

Critical minerals are raw materials such as lithium, cobalt, and rare earth elements, which are essential for renewable energy technologies such as batteries, solar panels, and wind turbines. Similar to fossil fuels, critical mineral reserves are geographically concentrated, primarily in the Global South. For example, the largest lithium reserves are located in Chile, Bolivia, and Argentina, while cobalt is predominantly sourced from the Democratic Republic of the Congo, and significant nickel deposits are found in Indonesia.

Moreover, China dominates the refining and production of critical raw minerals, making the EU heavily dependent on China for their supply. Additionally, the energy transition is expected to significantly increase demand for these materials. According to the International Energy Agency, demand for critical minerals could be four times as high by 2040 if states adhere to the goals set in the Paris Agreement. This reliance poses substantial risks for Europe, as escalating tensions with countries like China could lead to supply disruptions or price manipulation.

EU (upcoming) initiatives to adjust to the new reality

With the European Green Deal and the Fit for 55 Package, the EU is increasing its efforts to accelerate the energy transition and enhance its energy production capabilities. At the same, to address its vulnerabilities, the EU has introduced initiatives to diversify supply chains, reduce dependencies, build domestic capacity and strengthen partnerships which like-minded countries for resources.

A first example is REPowerEU, which was launched in response to the energy supply disruptions caused by Russia’s invasion of Ukraine and the need to reduce dependence on Russian energy imports. REPowerEU focuses on diversifying energy sources, expanding renewable energy production, and improving energy efficiency. Key measures include scaling up solar and wind power, increasing renewable hydrogen production, investing in alternative energy infrastructure, and more generally modernising the energy system. In light of this, the European Commission is also planning to publish a Roadmap towards ending Russian energy imports on 26 March 2025.

Second, the Net-Zero Industry Act (NZIA) was designed to scale up clean technology production across the EU, for instance by subsidising green industry, reforming electricity markets, and building critical mineral supply chains. It was proposed in 2023 alongside the Critical Raw Materials Act (CRMA), which aims to reduce the EU’s reliance on third countries for critical minerals by boosting domestic production, streamlining supply chains, and promoting recycling and substitution of critical materials.

Third, the Global Gateway is a €300 billion investment strategy that should strengthen global infrastructure investments and partnerships, including in the energy sector. The initiative focuses on advancing clean, secure, and sustainable energy projects that improve energy access, accelerate the transition to renewable sources, and enhance energy security both within Europe and its global partners. For example, at the end of 2023, the EU and Namibia established a strategic partnership focused on sustainable raw materials value chains and renewable hydrogen.

Additionally, the EU is increasingly recognising the potential of a more integrated energy market, supported by cross-border infrastructure, to enhance energy security and stabilise prices across Member States. Initiatives like the Trans-European Networks for Energy (TEN-E) and the EU Action Plan for Grids aim to strengthen interconnections within the EU. Energy market integration is also a central focus in Enrico Letta’s report “Much More Than a Market“, which highlights that it can enable a rapid and cost-effective deployment of clean energy sources. This would accelerate the EU’s energy transition and shift the geopolitics of energy in its favor.

The EU will keep adapting to geopolitical realities. For instance, Commissioner for Energy and Housing Dan Jørgensen has been tasked by Von der Leyen to review the security of supply framework to adapt it to the “geopolitical context”. In 2024, the Commission also launched a public consultation to assess the EU’s energy security framework in light of the energy crisis and the ongoing clean energy transition, signaling potential adjustments. Additionally, new measures are introduced in initiatives such as in the second hydrogen auction of the EU Hydrogen Bank, where a new eligibility requirement limits electrolyzer stack sourcing from China to a maximum of 25% (in MWe).  

The EU’s growing emphasis on an integrated energy market aligns closely with the objectives of the Clean Industrial Deal, which aims to decarbonise the EU economy while maintaining its competitiveness. The Clean Industrial Deal can contribute to the EU’s energy security goals by promoting the development of clean technologies, fostering innovation, and reducing reliance on imported fossil fuels. Published together with the Clean Industrial Deal on the 26 February 2025, the Action Plan on Affordable energy will offer a plan to drive down electricity prices in Europe, as they are currently 2-3 times higher than in the US, which undermines the EU competitiveness.

All these initiatives can stimulate the shift in global energy geopolitics, positioning Europe as a key player in the transition to a sustainable, low-carbon economy.

The impact of energy geopolitics on European businesses

For businesses, this is a moment of transformation. On the one hand, they face a number of challenges as the energy landscape changes. The EU’s reliance on energy and resource imports, especially critical minerals, can make businesses vulnerable to geopolitical instability, which can disrupt supply chains and lead to fluctuating prices. Additionally, the push to transition to cleaner energy solutions can create pressure for businesses to make higher investments, while legislation to support this can create administrative burdens. This pushes businesses to be adaptable, forward-thinking, and resilient to navigate the shifting energy landscape.

On the other hand, the shift to clean energy presents significant opportunities. Companies that invest in green technologies like hydrogen, advanced batteries, CC(U)S, and smart grids will not only contribute to strengthening the EU’s energy security, but also gain a competitive edge in a rapidly evolving market. By aligning with EU priorities and building strong and flexible supply chains, businesses can remain competitive and take advantage of new growth opportunities while contributing to the transition to a more sustainable energy future.

Do you want to ensure your business is prepared for the energy transition and capitalise on the opportunities that this shifting geopolitical landscape offers? Publyon provides tailor-made solutions to help you navigate the evolving EU policy landscape and anticipate its impact on your organisation. Do not hesitate to contact us!