Methodologies for Quantifying Energy Security in the Power Sector

1. Methodologies for Quantifying Energy Security in the Power Sector William Blyth 24th April 2005

2. Why quantify energy security? • Interested in quantifying in interactions between energy security and climate change policies • Many energy policy issues linked through the technology / fuel mix. Develop tools for integrated approach to energy policy making. • Can already quantify climate change impacts of technology / fuel mix – needed a quantitative measure for energy security

3. Energy policy linkages Climate change mitigation Geopolitical energy security Power system flexibility and reliability • Hypothesis – use fuel / technology mix as linking factor

4. Difficulties associated with quantifying energy security • Many different aspects to energy security • No generally accepted definition - depends on local circumstances and political priorities • Absolute quantification probably impossible • Try to develop method which can track trends over time, and shows response to policy actions

5. What approach did we take? • Avoid attempt to quantify externality in financial terms • Instead focus on underlying causes of energy security concerns • Focus on two aspects • Geopolitical energy security in primary (fossil) fuel markets • Reliability of power supply

6. Geopolitical energy security • Underlying policy concern: concentration of primary energy resources and resulting market power of supply countries • Focus on risk of price distortion rather than physical supply disruption • Take account of political stability of suppliers and flexibility of buyers to switch to different suppliers • Domestic supply treated as part of the market – i.e. does not assume that domestic supply insulates from world / regional market price

7. Defining the market Country X domestic supply (zero geopolitical risk) 1 2 3 IEA (oil) Energy Supply Market (oil/gas/coal separate markets) Country X demand

8. Concentration of suppliers – world oil market

9. Concentration of suppliers – world coal market

10. Concentration of suppliers – S. European gas market

11. Trends in geopolitical energy security measure

12. Factors excluded from measure • Direct price effects – volatility, balance of supply & demand etc • Terms of trade effects for net exporters • Dependency on infrastructure development – e.g. LNG investments • Physical security (e.g. infrastructure concentration)

13. Policy driver interactions • Test policy synergies • Analyse root causes of trends

14. Reliability of Energy Supply • Reliability of complex system depends on many factors • Broadly based around ancilliary services • Flexibility of generation (response rates) • Intermittency and capacity credit • Voltage stability services • Transmission security • Black-start services

15. Broad-brush assumptions… • Intermittency… Capacity credit = how much of the average annual power output can be relied on at times of peak load? Wind 50% Solar 50% All others 100% • Flexibility…

16. Intermittency Effect of increasing non-hydro renewables to 5%, 10% and 15% in 2010, 2020 and 2030 respectively

17. Flexibility

18. But… reliability is system specific • Impact of adding any given technology depends on what is already in the system • Reliability specifically managed by system operators • Quantification (of costs) possible at a detailed level, but headline indicators are of limited value

19. Conclusions and next steps • Quantified approach can help to structure thinking about energy security • Identify key drivers • Trends • Effects of policy action • Needs to be analysed at national level, taking account of energy system, market structure and policy priorities • Case Studies being undertaken with IEA member countries using the Geopolitical Energy Security measure to test its usefulness as a policy analysis tool