Energy diversification means using different energy sources, suppliers and transportation routes to reduce dependence on a single resource or provider. A country that diversifies its energy mix insulates itself from energy disruptions and strengthens its energy security.
Diversification can’t protect importing countries from market risks such as fluctuations in supply or pricing, but it can reduce the risks posed by political unrest or natural disasters.
What are the benefits of energy diversification?
Political independence: When one country relies on another to supply the majority of its energy needs, it exposes itself to intimidation, coercion and manipulation by its supplier. Spreading energy needs across a variety of suppliers enables the importing country to reduce its dependence on a single supplier and bolster its independence in world politics.
Economic growth: Energy diversification encourages economic growth. Drawing energy from multiple sources and suppliers insulates the importing nation from energy disruptions when one source or supplier is unable or unwilling to meet demand. Energy diversification ensures continued energy security, which provides a fertile climate for entrepreneurship, innovation, and research and development.
Environmental protection: Developing renewable resources such as solar and wind power diminishes the threat of energy scarcity. Renewable resources emit little or no pollutants and have minimal impact on the environment. Investments in renewable energy also spur innovation and job growth.
How can a country diversify its energy mix?
Each country has a unique blend of natural resources, energy demands and geopolitical constraints, so approaches to energy diversification will differ. However, some basic steps can be followed by all nations that aim to diversify their energy mix:
- Create a policy framework that attracts investment by rewarding entrepreneurship and innovation and constraining inefficiency and waste.
- Partner with the private sector to identify and develop alternative energy sources.
- Engage experts to identify the best mix of accessible domestic and nondomestic energy sources.
- Work with the international community to establish and enforce environmental standards related to energy exploration and generation.