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

Why quantify energy security? Interested in quantifying in interactions between energy security and climate change policies 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. 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 Can already quantify climate change impacts of technology / fuel mix – needed a quantitative measure for energy security

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

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

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

Geopolitical energy security Underlying policy concern: concentration of primary energy resources and resulting market power of supply countries 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 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 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 Domestic supply treated as part of the market – i.e. does not assume that domestic supply insulates from world / regional market price

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

Concentration of suppliers – world oil market

Concentration of suppliers – world coal market

Concentration of suppliers – S. European gas market

Trends in geopolitical energy security measure

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

Policy driver interactions Test policy synergies Analyse root causes of trends Analyse root causes of trends

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

Broad-brush assumptions… Intermittency… Intermittency… Capacity credit = how much of the average annual power output can be relied on at times of peak load? Wind50% Solar50% All others100% Flexibility… Flexibility… Plant type Ramp rate - % of rated output per minute Hydro50-100% Gas turbines 10-20% Coal1-3% NuclearN/A

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

Flexibility

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

Conclusions and next steps Quantified approach can help to structure thinking about energy security 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 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 Case Studies being undertaken with IEA member countries using the Geopolitical Energy Security measure to test its usefulness as a policy analysis tool