Rising Energy Prices Aren’t a Crisis. They’re a Design Flaw.

What’s happening in Iran will push energy prices higher, as markets react to uncertainty and the perceived risk to supply. The pattern is familiar because the system produces the same outcome whenever instability enters the equation.

Attention tends to settle on the event itself, but the real issue sits beneath it. The structure of the global energy system is built in a way that amplifies disruption rather than absorbing it.

Energy today depends on stability in an environment that rarely offers it. Oil and gas move through narrow geopolitical corridors, across contested regions, and along supply chains that require coordination between governments, militaries and markets. When that coordination holds, supply flows and prices remain stable. When it weakens, prices respond immediately and the impact spreads quickly through economies.

Volatility follows naturally from this model. Production is concentrated, infrastructure requires significant capital and long development timelines, and distribution relies on extended supply chains that remain exposed to geopolitical risk. These characteristics made sense in a different era, when systems moved more slowly and global tensions carried less immediate economic consequence. In the current environment, they introduce persistent instability.

Countries continue to build on top of this foundation. When prices rise, governments respond with subsidies, caps and short-term interventions designed to contain the impact. These measures provide relief at the edges while leaving the underlying structure unchanged, which is why the same cycle repeats.

Alongside this, a different model has already taken hold.

Solar and storage have become the lowest cost electricity humanity has produced, with costs continuing to fall and performance continuing to improve. 

Recent analysis from Ember shows 24-hour utility-scale solar-plus-storage delivering power at around 10 cents per kilowatt-hour, compared to roughly 12 cents for coal and closer to 18 cents for nuclear.  An Australian homeowner can generate electricity at under 5 cents per kWh - right where they consume it.

The solar and storage advantage extends beyond price. They operate on a fundamentally different architecture, distributed rather than centralised, deployed locally rather than transported globally, and independent of geopolitical alignment.

Once installed, they generate power predictably, without exposure to fuel price swings or disruption across international supply routes. The economics shift as a result, favouring systems that are simpler, faster to deploy and less dependent on external variables.

The question that follows is straightforward. If a lower cost, more stable model is already available, why do so many economies remain tied to one that produces repeated volatility?

The answer sits in how the system was set up…Investment frameworks, regulatory systems and institutional habits continue to favour large, centralised infrastructure.  And now aggressive petro-state geopolitics kick in, with the US following the tobacco industry in trying to fix the system to milk the last revenues as long as possible.  

Energy security is often discussed in terms of supply, yet the more important factor is system design. A system built around a small number of large, interconnected assets will always carry exposure to disruption. A system built on distributed energy behaves differently, absorbing shocks, reducing dependence on external factors and placing control closer to the point of consumption.  

My friend Saul Griffith wrote an excellent piece recently on how the middle powers could collaborate to electrify the industrial economy in a more sustainable, lower cost and lower risk networked approach.

This shift has direct economic consequences. Energy underpins industrial output, technological advancement and long-term growth. Economies that deliver low-cost, stable and abundant energy position themselves to outperform. Those that remain exposed to volatility continue to absorb the cost through higher prices and reduced competitiveness.

Iran serves as a reminder of how the current system responds under pressure.

The reaction is immediate, predictable and repeated.

The outcome will continue to follow the same path for as long as the structure remains in place.