The global energy landscape has changed dramatically in recent years, and geopolitics has become the main factor defining the evolution of energy markets. Francesco Sassi, Research Fellow Energy Geopolitics and Markets at RIE and EklipX Research, warns that price stability and supply security are now more determined by international relations than by traditional supply and demand dynamics.

“Geopolitics and energy are more intertwined than ever. It is not just about tensions between the EU and the United States but a global phenomenon that also involves China, Russia, and the trade of hydrocarbons and renewables. All energy commodities are affected in some way by these tensions,” explains Sassi in an interview with Strategic Energy Europe.

Supply Chains and the Effects of U.S. Tariffs

One of the most sensitive aspects of the energy transition is the supply chain for renewable technologies, which heavily depends on China. In this context, U.S. protectionist policies, such as tariffs on Chinese solar products like solar cells, wafers, and polysilicon, are generating uncertainty in Europe.

“The tariffs imposed by the Trump administration, in continuity with Biden, have restricted access to Chinese solar products in the U.S. market. This could divert that flow of components to Europe,” Sassi points out.

However, this diversion will not necessarily benefit the EU. U.S. protectionism could trigger a chain reaction, with more countries imposing trade restrictions in strategic sectors. “Protectionism is a virus. A measure in one country can spark a spiral of restrictions in other markets, affecting the stability of the renewable energy supply chain. More protectionism leads to more protectionism worldwide,” warns.

“It is impossible to anticipate how high or low prices will be. What is certain is that prices will become much more unstable because geopolitics will be the primary variable influencing these markets. Green manufacturing is also understood as a political and diplomatic lever by the U.S. administration, but the Chinese government also has a very deep understanding of how it could be used as a diplomatic tool,” the expert adds.

In this regard, the EU faces the dilemma of protecting its solar industry with similar measures or opting for greater integration with China. Although some sectors are pushing for tariffs on Chinese wind turbines, Sassi believes that a trade war with China could have negative effects on Europe.

“Europe is more reactive than proactive. It will respond if it is targeted with trade measures, but it will not initiate a tariff war unless necessary,” he states.

“There is a possibility that Europe will respond to China’s protectionism with tariffs on wind products. But I believe and hope that a diplomatic channel can be opened to resolve the differences and try to prevent this trade war between the EU and China from escalating, which would also affect other continents such as Africa or even Latin America,” he adds.

The Impact on Energy Prices and Volatility in Europe

Beyond trade, geopolitical tensions have turned energy into a political weapon, directly affecting gas and electricity prices in Europe. Since Russia’s invasion of Ukraine, energy markets have experienced unprecedented volatility.

“Energy prices no longer respond solely to supply and demand. Instability is now structural and will persist in the short and medium term,” Sassi states.

Although the market has adapted to the Russian gas crisis, prices remain extremely volatile, especially in winter and summer, when consumption spikes.

“During spring and autumn, prices could be less volatile, but in winter and summer, any geopolitical crisis can cause volatility to soar and even generate negative prices,” the expert explains.

Moreover, the increasing price instability affects the competitiveness of European industry and the planning of renewable investments. An uncertain outlook on energy costs could delay wind and solar projects, increasing dependence on fossil fuels.

Europe: An Interconnected Market with Different Levels of Risk

Each European country faces the energy crisis differently, depending on its energy mix. France, with its strong reliance on nuclear energy, is more resilient to gas fluctuations, while Germany, with its high percentage of renewables, is vulnerable to variations in wind and solar production.

“There is no single country more exposed than others. It all depends on the crisis and when it occurs. But what is certain is that Europe is so interconnected that a problem in one country is felt across the entire region,” Sassi highlights.

The nuclear crisis in France in 2021-2023 and the low renewable energy output in Germany in the last months are examples of how issues in one country can trigger domino effects across the continent.

Looking Ahead to 2025: Uncertainty and the Politicization of Energy

Sassi warns that in the coming years, energy will become increasingly politicized, and markets will need to adapt to this new reality.

“From the COVID-19 pandemic to the war in Ukraine, energy has ceased to be just an economic sector and has become a tool of power. Governments, companies, and investors must understand that energy is now a geopolitical issue,” he emphasizes.

This new landscape forces sector players to prepare for a less predictable market, increasingly influenced by political and strategic decisions.

“The challenge is not just the energy transition but achieving it in a world where energy is used as a tool for pressure and negotiation,” Sassi concludes.