GNESD Energy Security Thematic Study: Some Findings Ram Shrestha and S. Kumar

Objectives of the Study Analysis of energy resources and use Two-tier energy security analysis: (at national and household levels) - Identification of threats and vulnerabilities - Measures adopted to enhance energy security Countries under the study: - Argentina, Brazil, India, Kenya, Senegal, South Africa, Thailand, Tunisia

GNESD Centres Participating in the Energy Security Study Africa: The African Energy Policy Research Network/Foundation for Woodstove Dissemination (AFREPREN), Kenya Energy Research Center (ERC), South Africa Mediterranean Renewable Energy Centre (MEDREC), Tunisia Environmental Development Action in the Third World (ENDA-TM), Senegal Asia: Asian Institute of Technology (AIT), Thailand The Energy and Resources Institute (TERI), India South America: Centro Clima/COPPE/Federal University of Rio de Janeiro and CENBIO at the University of Sao Paolo, Brazil The Institute for Energy Economics at Bariloche Foundation (FB), Argentina

Different Definitions of Energy Security (1) Energy security at the national level is “securing adequate energy supplies at reasonable and stable prices in order to sustain economic performance and growth” (APERC) => A developed country definition? According to UN (2007) : A nation-state is energy secure to the degree that fuel and energy services are available to ensure: a) survival of the nation, b) protection of national welfare, and c) minimization of risks associated with supply and use of fuel and energy services. The five dimensions of energy security include energy supply, economic, technological, environmental, social and cultural, and military/security dimensions” (UN, 2007).

According to the Integrated Energy Policy, Government of India: “...we are energy secure when we can supply lifeline energy to all our citizens irrespective of their ability to pay for it as well as meet their effective demand for safe and convenient energy to satisfy their various needs at competitive prices, at all times and with a prescribed confidence level considering shocks and disruptions that can be reasonably expected.” Different Definitions of Energy Security (2)

South Africa Study: Energy security means ensuring that diverse energy resources, in sustainable quantities and at affordable prices, are available to the South African economy in support of economic growth and poverty alleviation, taking into account environment management requirements and interactions among economic sectors’ (DME, 2007). Senegal Study:“to secure for all the access to energy products in sufficient quantity, of good quality and at an affordable price to meet the economic growth needs, the fight against poverty and development, without harming the environment.” Different Definitions of Energy Security (3)

Indicators used in the national level analysis Mostly used available secondary data (some primary data used in Argentina case). Indicators used for the national level study: –Energy import dependency  Net Energy Import Ratio (NEIR) –Adequacy of supply capacity: Supply-Demand gap – Diversification of energy sources  Shannon-Wienier Index (SWI) and Herfindhal-Hirshman Index (HHI) –Availability of fossil energy resources and their rate of depletion.  Reserve to production ratio (R/P ratio) –Energy Intensity (E/GDP) –Economic implications of energy imports Vulnerability index 1 = Expenditure on energy imports / GDP Vulnerability index 2 = Expenditure on energy imports / Total export earnings

Indicators used in the household sector analysis –Total household expenditure on energy –Household expenditure on different fuels –Household energy expenditure for different income groups –Access to electricity and other modern fuels

Energy security by resource type Countries with -Biomass energy security problem: e.g., Kenya and Senegal, India (?) -Oil and gas security problem: India, Kenya, Senegal, Thailand, Tunisia, South Africa. -Countries with electricity security problem (almost all study countries)

Net Energy Import Dependence Wide variation in Net Energy Import Ratio (%) (with biomass included) : -9.5% to +58% ArgentinaBrazilIndiaKenyaThailandTunisiaSenegalSouth Africa OECD NEIR % -9.5% (2007) 10.6% (2007) 23.6% (2005) 20.0% (2005) 45.8% (2006) 41% (2004) 58.5% (2006) 20.0% (2005) 43.0% (2005) With biomass excluded, NEIR is significantly higher in several countries ; e.g., in Senegal NEIR rises to 98%. NEIR increasing in most countries over time Poor countries with higher NEIR value more vulnerable to energy price rises and supply restrictions

Note: VI-1 = Net energy import cost as % of GDP VI-2 = Net energy import cost as % of total export earning *2007 figures Energy import cost is rising over time both as % of GDP and total export earnings in most net energy importing countries. Economic Vulnerability to Energy Imports Indica- tor Argen- tina Brazil*IndiaKenyaSene- gal South Africa Thai- land Tuni- sia VI-1 (%) VI-2 (%)

Energy Price Rise and Economic Vulnerability due to Energy Imports In Senegal VI-1 value was 5 to 6% during ; it increased to 9.5% in 2005 and 18.2% in The share of the energy bill in total export earnings (VI-2) was around 30% prior to , and it increased to 56% in In South Africa VI-2 increased from 1.4% in 2002 to 13.4% in (Note: VI-1 = Net energy import cost as % of GDP VI-2 = Net energy import cost as % of total export earning)

Power Sector Security Issues Heavy reliance on one energy resource for power generation: Brazil: 70% hydro India: > 59% Coal Kenya: > 50% in Hydro Senegal: > 90% (thermal) South Africa : 91% (coal) Thailand: > 66% Natural gas Tunisia: 88% Natural gas

Distortion in Pricing as a Contributor to Energy Insecurity Energy security need not always be related to high price of imported energy. –In South Africa, despite having big coal reserve, domestic power plants face unreliable supply of coal from multinationals due to distortion in coal price (as compared to the export price). Increase in electricity price with the rising price of coal– threat to electricity security (South Africa and India). Subsidy in electricity price – a factor behind capacity shortage in many countries

Growing biomass energy demand and supply gap – Case of Kenya Low income countries like Kenya are trapped into heavy dependence on biomass energy Biomass accounted for 68% of total energy supply in 2004 Biomass demand growth: about 1.5% p.a. during Forest cover less than 3% of total land area. Rapid depletion of forest area threaten future supply of biomass energy - predominantly used by households. =>Un-sustainability of biomass use? =>A biomass energy resource related security problem (besides fossil fuels and electricity related energy security problems).

Fossil fuel security: Case of India Increasing domestic demand-supply gap –in coal (9%) and gas (40%) Increasing import dependency (71% of oil, and 65% of coking coal recently) –(low quality of Indian coal) Falling R/P ratios of coal and oil reserves

Fossil fuel security - Case of Tunisia R/P ratio of crude oil falling (peaked in 1982) Demand growing at 1.3% p.a. since 2000 R/P ratio declining at 3.6% (CAGR) during Became a net importer of oil since Lack of adequate investment to find new oil and gas reserves – a factor!

Electricity supply security Due to inadequate investment and/or shortage of fuel supply –India, Tunisia, Senegal Due to due to fluctuations in water inflows due to changes in hydrological conditions (with draught etc) –Brazil and Kenya In India – electricity shortage of 10% and peak capacity shortage of 13.5% in 2006/07

Energy Security Policies and Measures

Energy efficiency likely to be a more cost effective measure for attaining energy security than other options EE policies include: Setting energy reduction targets (at sectoral and national levels): e.g., South Africa (12% energy saving target at the national level to be achieved by 2015). DSM programs: Thailand Energy Conservation Fund: Thailand Appliance efficiency standards and labeling: Brazil, India Building energy code=> e.g., requiring installation of solar water heaters in new buildings (several countries) Energy efficiency based appliance tax (Tunisia) Energy Efficiency Programs and Policies

Energy efficiency likely to be a more cost effective measure for attaining energy security than other options Policies & Programs: Setting energy reduction targets (sectoral and national) e.g., South Africa (12% energy saving target at the national level to be achieved by 2015). DSM programs: Thailand Energy Conservation Fund: Thailand Appliance efficiency standards and labeling: Brazil, India Building energy code=> e.g., requiring installation of solar water heaters in new buildings (several countries) Energy efficiency based appliance tax – a proposal (Tunisia) Energy Efficiency Programs and Policies

Promotion/distribution of efficient appliances: –Improved cook stoves (India) –Energy efficient lamps (Brazil, India and several other countries) Energy Efficiency Programs and Policies (2)

Renewable Portfolio Standard (RPS): –Argentina, Brazil (in power), South Africa (power) Renewable Energy Purchase Obligation - Fixing the % of energy to be purchased from renewables, e.g., India Biofuels Program (for transportation)- Brazil, Thailand Biogas Program, India Strategically targeted RET, e.g., solar water heaters in Brazil Subsidy / tax incentives on Renewable technologies Use of Nuclear Energy: Thailand by 2020/2021 Use of other sources of power generation: MSW, biomass (through CDM) in several countries Building energy code=> e.g., requiring installation of solar water heaters in new buildings Renewable Energy Promotion Policies (for Energy Diversification)

Diversification of Energy Resources (based on HHI) Low level of diversification in low-income resource-poor countries No clear relationship between income level and diversification Increasing diversification over time. Lower level of diversification than in OECD. Source: IEA (2008)

Diversification of Suppliers: India Energy equity investment abroad: India Energy Source (Supplier) Diversification Policies

Cross-border sub-regional hydropower development and other energy trade: –Thailand, Brazil, Argentina, South Africa Cross border natural gas development and trade Sub-regional power system interconnection Regional Energy Resources Development and Trade

Strategic Energy Reserve: India (5 million tons of oil in SPR by 2012) Schemes for enhanced/improved oil recovery: India Policies –to attract private investment (oil industry in Tunisia, independent power producers (IPP) in Brazil, Tunisia, Thailand) and –to encourage the use of Clean Development Mechanism (in Brazil, India) in reducing the investment gap. Other Energy Security Policies and Measures

Adequacy of Policies & Programs? Energy security based policies and programs are relatively new in the countries under the study (except India and Brazil). Difference between identification of policies and measures and their implementation. Many policies and targets are either proposals only or are announced to be effective at a future year. Financial, informational, technical, institutional/regulatory barriers need to be overcome, –e.g., MNRE in India re: institutional barrier CDM and other carbon finance mechanisms need to be exploited.

Biomass Demand Supply Gap Reliance on non-marketed sources of energy. –Substantial fraction of the population and industries in these countries rely on non-marketed sources of energy (e.g. collected biomass) and this high dependence is likely to continue for a foreseeable future. Biomass as % –The energy supply problem is compounded by the fast decreasing forest resources in many developing countries. =>SENEGAL /KENYA S –For example, in Senegal, biomass provides over 43% of the total primary energy requirements and its forest area is reducing. 68% of energy consumption depends on biomass and its forest coverage land is less than 3%.

Energy Security Requires more than Energy Sector Solutions Energy Security problem closely linked with transport and other infrastructure development issues. Excessive reliance on road transport leads excessive use of petroleum products. Brazil example.

Structure of Transport Sector in Brazil, OECD and Developing World [GEIPOT, 2001] Transport TypeOECDDeveloping World Brazil Road Rail Water Other

Energy Security Issues at the Household level The energy security related vulnerabilities and threats in the household sector in the low income countries have the following characteristics: –Low access to modern energy –High share of energy costs in total monthly income / expenditure of the poor Energy cost up to 40% of total monthly expenditure in Kenya –Rising costs of energy – High dependency on biomass –Unreliable supply of electricity and LPG

–There exists big inequity in terms of access to modern and safe energy between the poor and rich in several countries. –Access to electricity is very high (over 90%) in some countries (Thailand, Argentina, Brazil), the access is low in others; e.g., in Kenya, access to electricity in households is about 15% (only about 8% of HHs have access to LPG). Household Access to electricity

Rising Residential electricity consumption per capita

Rising Household Energy Expenditure – Case of Thailand [AIT,2009]

Household Energy Expenditure by Income Group in Argentina [FB, 2009]

Household Energy Expenditure by Income Group in Thailand [AIT, 2009]

Energy Pricing/Subsidy and Energy Ladder Provision of cleaner energy – an energy security issue in developing countries Movement down the energy ladder observed with the removal of LPG subsidy and increase in international price of LPG e.g., Fuelwood’s share in Brazilian residential energy consumption increased from 31.8% to 37.1% during

Dependence on Biomass –Biomass energy use in household sector remains high, especially in the low income countries. –The household sector is the major user of biomass energy (over 72% of household energy consumption in India and over 60% in Thailand, while it is below 13% in rural Argentina). –In countries where options other than biomass are either not available or not affordable, ensuring sustainable supply of biomass energy presents a major energy security challenge.

Data Problems and Further Studies Data on foreign fuel suppliers - Diversification of suppliers/sources not examined. Temporal data on household energy mix and appliance stocks by income group and by rural/urban categories Household energy expenditure by fuel type - analysis of energy ladder hypothesis? - analysis of energy equity/energy poverty? Implications of energy industry privatization/deregulation on energy security Energy saving potentials of energy efficiency and RE policies and costs

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