Freedom – renewables break fossil fuel stranglehold

Ten million years from now, the world’s most infamous chokepoint will vanish. Beneath the waves of the Strait of Hormuz, the Arabian continental plate is grinding slowly but relentlessly north, ploughing into Eurasia, buckling the Earth’s crust into mountains and sealing in the region’s vast reserves of oil. As it moves, it is taking Hormuz with it – squeezed between Oman to the south and Iran to the north, the Strait is shrinking by a thumb’s width every year.²

More quickly, but just as decisively, the tectonic plates of global politics and economics are also shifting. The unipolar world order is breaking down – globalised supply chains, which were once celebrated for their efficiency, have become a vulnerability. Nowhere has this been clearer in 2026 than in Hormuz itself, where what geology is doing slowly, geopolitics did overnight – close the strait and stop the flow of oil³.

Oil has been a geopolitical lever for more than fifty years. For most of this time, import-dependent governments have had little choice but to soften the blows of energy shocks by building stockpiles and diversifying suppliers. In today’s fracturing geopolitical landscape, however, softening the blow isn’t enough.

Instead, pioneering governments are finding a credible way to blunt the energy weapon. Renewable electricity generation and economy-wide electrification are often billed as a way to cut emissions or diversify energy supply. Now, though, the transition to an electric economy has come to represent something simpler and more fundamental – freedom.

The shock that didn’t land – Spain shrugs off Hormuz energy crisis

Rising from the Aljarafe plateau in Spain, a little over 10 miles west of Seville, is a world-first. Looking like something from a science-fiction movie, a 115-metre tall tower stands in front of row upon row of mirrors – 624 in all – laid out on the ground in front of it. On sunny days – which are frequent in this part of Andalusia – every mirror reflects the sunlight, sending up visible beams which converge at the top of the tower.

This is Planta Solar 10 – the world’s first ever commercial concentrated solar tower, in which sunlight is concentrated on a single point to heat water that powers a turbine.⁴ Since its construction in 2007, PS10 has been a symbol of Spain’s innovative approach to renewables.

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Following a fresh rollout push in 2020, the country is now home to 49 concentrated solar power facilities; many more solar photovoltaic plants (including some of the largest in Europe); and more than 22,000 wind turbines⁵. The economics for some of these installations have proven tricky – oversupply has led to curtailments and hit the sector’s profitability. What can’t be denied, however, is its resilience against external energy shocks.

In the first half of 2021, before renewables had fully established, Spain’s wholesale electricity price rose 50% as the cost of imported European gas soared. This year, a 75% rise in gas prices has had little impact – years of renewable uptake have weakened the link between the gas and electricity price. By contrast, Italy, which is more dependent on gas for electricity generation, had an average wholesale power cost three times higher than Spain’s in March of this year.⁶

Spain’s electricity prices are much less influenced by gas in 2026 compared to the previous gas crisis

Renewables outcompete fossil fuels

Spain isn’t the only country to have broken the link between fossil fuel shocks and electricity prices – Uruguay, often held up as the poster child of renewable resilience, has been more successful still.

In 2008, 50% of Uruguay’s energy came from fossil fuel imports, leading to high prices and power-cuts, especially during drought, when hydropower generation was low.⁷ By 2015, however, following an unprecedented renewables rollout designed by Energy Secretary and physicist Ramón Méndez Galain, Uruguay produced 98% of its electricity from renewables (including hydropower, wind, solar, and biomass).

The shift was so effective that the country became a net electricity exporter, underscoring Méndez Galain’s belief that energy freedom should be the transition’s driving purpose.⁸ Given the scale of his success, it is no surprise that this year’s energy shock has made no difference to the country’s electricity prices.

Pakistan has shown that the same forces can work from the bottom up rather than the top down. Faced with escalating electricity bills after the 2022 fuel price surge, and another spike when the government withdrew the subsidies that had cushioned them, Pakistani households, farmers, and businesses took the obvious step – buying cheap Chinese panels themselves.⁹

Solar panel imports surged – more than 51GW of cumulative solar PV capacity had been imported by early 2026, up from less than 1GW in 2018. It is estimated that this year alone, with imported energy prices elevated due to the Hormuz crisis, Pakistan could save USD 6.3 billion in oil and gas purchases.¹⁰ Solar is now on course to supply around a fifth of Pakistan’s electricity – according to the Centre for Research on Energy and Clean Air, this makes it one of the fastest consumer-led energy transitions on record.¹¹

As Muhammad Mustafa Amjad of Islamabad-based energy think tank Renewables First puts it, “It’s a very bottom-up revolution. […] It’s all about the economics. Renewables are out-competing the traditional sources of energy.”¹²

For investors, clean energy firms, and governments alike, this global shift is as much about materials as it is about energy

Electrification now

Where Spain, Uruguay, and Pakistan have led, the Iran war has pushed others to follow. Most ambitious is Indonesia, which plans to build 100 GW of solar capacity – enough to double the country’s entire electricity generating capacity from all sources – in just two years, having accelerated a much-publicised five-year plan in response to the energy crisis.¹³ In the Philippines, energy secretary Sharon S. Garin announced the fast-tracking of 1.4 gigawatts (GW) of renewable energy projects, stating: “Amid the Middle East conflict, accelerating the development of renewable energy and storage is both a strategic necessity and a national imperative.”¹⁴

Electricity production is only one side of the story, however. This year’s rising petrol, diesel, and gas prices appear to be giving fresh impetus to the shift towards end-user electrification.

In South Korea, for instance, registrations of EVs more than doubled year-on-year in March 2026. Europe saw strong interest, too, with UK sales reaching a record monthly high. And even in the US, where the end of subsidies had hit the sector hard, there was a 17% rise in used EV sales compared with the previous quarter.¹⁵ Europe also saw a surge in heat pump sales in Q1 2026, with high gas prices thought to be partly the cause.¹⁶

The transition from hydrocarbons to materials

For investors, clean energy firms, and governments alike, this global shift is as much about materials as it is about energy. Unlike the hydrocarbons system – in which billions of tonnes of fossil fuels must be extracted each year¹⁷ – clean electrification requires heavy up-front extraction of virgin materials which is set to reach a peak in 2050 then tail away, as new energy infrastructure is established and recycling expands¹⁸. Copper, nickel, lithium, aluminium, and myriad other metals and minerals are essential for upgrading electricity grids, expanding charging networks, and manufacturing solar panels, wind turbines, and batteries – and demand is growing rapidly¹⁹.

Mined output growth for battery metals and rare earth elements has markedly accelerated in recent years

As demand rises, however, so does the threat of new chokepoints. Each of the transition’s many critical materials come with their own unique supply constraints and geopolitical threats, with mining and processing often dominated by just a handful of countries.

Tackling this threat head on, in February 2026 the US convened the inaugural Critical Minerals Ministerial, where more than 50 nations unveiled the Forum on Resource Geostrategic Engagement (FORGE), a preferential trade zone aligning members’ policies²⁰. Washington also struck bilateral deals designed to set price floors to prevent Chinese undercutting,²¹ and announced a critical materials stockpile backed by USD 12 billion of public and private finance²².

Europe is taking the circular route. This year, the EU will invest EUR 3 billion to fast-track critical materials supply chain projects, while a purpose-made EU body will take care of stockpiling.²³ From September, the bloc will also bar exports of used lithium-ion batteries and ‘black mass’ – the powder left from processing spent batteries – to non-OECD countries. The EU’s Joint Research Centre estimates this could supply up to 1 million EV battery packs a year.

While governments pull policy levers, businesses are at the forefront of innovating new technologies to minimise or even remove the need for critical materials, and battery makers often take the lead. One such is Form Energy’s iron-air battery, which stores energy via “reversible rusting”. Currently under development in Minnesota, USA, and due to be fully operational by 2031, the installation will store 30 gigawatt-hours of energy, the equivalent of nearly one hour of the UK’s average electricity consumption²⁴. Crucially, it will discharge across up to 100 hours (as compared with less than four hours for typical lithium-ion grid storage²⁵), making it ideal for covering periods of renewables downtime.

Investing in transition materials

According to BloombergNEF, investment in the global energy transition away from fossil fuels reached an annual record of USD 2.3 trillion in 2025. In a sign that the transition is maintaining momentum despite political headwinds, investment in clean energy supply also outpaced fossil fuel supply by USD 102 billion.²⁶ In turn, clean-energy equities outperformed the MSCI World global market index, with a 33% return measured by the Bloomberg GS Clean Energy index.²⁷

At Lombard Odier, we understand that the transition to an electric economy is about value, not virtue. Over the decades to come, the winds of environmental policy will shift – but improving technological efficiencies, superior economics, and the geopolitical freedom that renewables and electrification bring point in only one direction.

We also understand that, at its heart, the energy transition is about materials. Through our Transition Materials strategy, we rethink the traditional view of commodities as driven primarily by economic growth, and see them instead as a fundamental part of a once-in-a-century structural transformation.

Though the rollout phase of the transition creates new geopolitical risks – once the infrastructure of electrification has reached scale and recycling systems have matured the need for newly-mined materials falls over the long-term. For governments and consumers seeking insulation from energy market disruptions, this moment – when there are no chokepoints left to seize – will be the moment of freedom.