Renewables Surge and Coal Rises Simultaneously as Hormuz Closure Reshapes Global Energy

Six months into the US-Israeli war with Iran, governments across Europe and Asia are accelerating renewable energy investment to reduce dependence on fossil fuel imports, after the effective closure of the Strait of Hormuz choked off roughly a fifth of global oil and LNG shipments. The International Energy Agency expects renewable power to become the world's top electricity source for the first time this year, with output projected to rise 8.5 percent, a jump the IEA says dwarfs the accompanying 1.4 percent rise in coal-fired generation over the same period.

 

Why Renewable Growth and Rising Coal Are Happening at the Same Time

 

The IEA's data reveals a pattern that complicates any simple narrative that the conflict has purely accelerated a green transition: renewable output is surging, but coal-fired generation is rising simultaneously, since renewables still cannot guarantee round-the-clock power on their own. With the Strait of Hormuz closed and oil and gas supplies constrained, some countries are turning to coal specifically because it offers reliable, dispatchable generation that intermittent renewable sources cannot yet fully replace without sufficient storage and grid infrastructure to back them up.

That dual increase illustrates a genuine tension in the current moment: the same supply shock driving governments toward renewable investment is simultaneously pushing some countries toward coal as a nearer-term, more immediately available substitute for constrained oil and gas supplies, meaning the conflict's net effect on the overall emissions trajectory is considerably more mixed than the renewable growth figures alone would suggest.

 

Why Emissions Are Still Climbing Despite the Renewable Surge

 

Even as renewable generation grows faster than coal in percentage terms, the IEA expects global greenhouse gas emissions to rise 1.1 percent this year to an all-time high of 14.2 billion tonnes. That outcome reflects a straightforward mathematical reality: percentage growth rates alone don't determine absolute emissions trajectories, since coal remains a considerably larger overall share of the global generation mix than the still-growing renewable sector, meaning even a smaller percentage increase in coal output can add more absolute emissions than a larger percentage increase in a smaller renewable base subtracts.

The IEA projects coal output will dip slightly by 0.7 percent in 2027, but expects gas-fired power generation to rise 1.5 percent from this year's levels over the same period, indicating the current disruption's effect on the overall fossil fuel mix remains a genuinely shifting and uncertain picture rather than a clear, sustained decline.

 

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Why Asia's Response Diverged Sharply by Country

 

Asian economies most dependent on oil and gas shipped through the Strait of Hormuz absorbed the sharpest shock, but individual countries responded in markedly different directions. China leaned heavily into solar, with output rising more than three times as fast as coal between March and July, while India, Vietnam and South Korea moved the opposite direction, burning more coal instead. Vietnam's government said last month it was considering building more coal plants to secure supply, a notable reversal given the country's pledge at the 2021 UN climate summit to build no new coal capacity after 2030.

That divergence suggests each country's response depended heavily on its existing domestic energy infrastructure and resource base rather than reflecting a uniform regional shift in either direction, with countries holding substantial existing coal infrastructure and reserves more readily falling back on that resource during the supply disruption than countries better positioned to rapidly scale renewable capacity instead.

 

Why Transport Fuel Demand Tells a Genuinely Different Story

 

Unlike power generation, where the disruption prompted a mixed shift toward both renewables and coal, transport fuel demand, which accounts for most global oil consumption, shows a more consistent downward reversal from pre-war growth projections. Goldman Sachs estimates gasoline-related demand fell approximately 20 percent at the disruption's April peak, while GL Consulting estimates a smaller but still substantial 15 percent decline. Higher fuel prices, reduced air travel, softer Chinese consumption and accelerated electric vehicle adoption together explain that decline.

China's role in that shift is particularly notable: the country's EV export value topped $10 billion for the first time this year, and electric models made up 63 percent of China's passenger car retail sales in June, up from 53 percent a year earlier, according to BofA analysts, who estimate electrification explains roughly a third of China's year-to-date decline in crude oil imports. That figure suggests the disruption accelerated an already underway structural shift toward electric vehicles in China specifically, rather than creating that shift from nothing.

 

Why Two Named Experts Offer a Genuine Counterweight to the Acceleration Narrative

 

Sverre Alvik, vice president and energy transition outlook director at DNV, cautioned that "changing a nation's energy mix requires investments, and higher interest rates will make the considerable upfront capital required for renewables and power grids more expensive," concluding that while the conflict is likely to ultimately favour decarbonisation, "it is not a one-way street." That caveat matters because renewable and grid infrastructure investment is capital-intensive and sensitive to financing costs, meaning a supply shock favouring renewables in principle can still be constrained in practice by unrelated macroeconomic conditions like elevated interest rates.

Victor del Carpio Neyra, senior research associate at Aurora Energy Research, raised a related point specific to gas supply: "as this supply materialises, LNG should become more affordable for import-dependent Asian markets, reducing the incentive for a permanent shift away from gas driven solely by the current conflict," referencing substantial new US LNG supply expected to come online between 2026 and 2030. That observation suggests the current disruption's effect on countries' long-term gas dependence may prove temporary if global LNG supply expands enough to restore affordable gas access once new capacity comes online, rather than triggering a permanent structural shift away from gas driven purely by the current Hormuz disruption.

 

What Remains Genuinely Uncertain

 

Whether the current combination of accelerated renewable investment and increased coal reliance ultimately nets out toward faster or slower overall decarbonisation once the Strait of Hormuz disruption eventually resolves, and whether the substantial new US LNG supply expected through 2030 reduces the urgency driving Asian countries' current renewable investment acceleration, will determine whether this period is later understood as a genuine turning point for the global energy transition or a temporary disruption that partially reverses once affordable fossil fuel supply is restored.