1. NS4960 Spring Term 2017 Bernell and Simon Chapter 1
Panama Key issues 2016 Inclusive Growth in Panama

2. Outline Energy Security as a Concept Conceptualizing Energy Security
Approaches taken
Major assumptions
Trade-offs with other goals
Time horizon – long vs. short
Conceptualizing Energy Security
Narrow vs broad definition
Energy independence
Government vs. Markets

3. Overview I Bernell and Simon, The Energy Security Dilemma, Chapter 1
Main orientation of volume
Analyzes the energy security of the U.S. – its ability to obtain reliable, affordable and sufficient supplies of energy while meeting goals of achieving
Environmental sustainability and
National security

4. Overview II Main premises
Economic and national security of the U.S. is largely dependent on fossil fuels, especially oil
Without significant changes to current practices and patterns of energy production and use, the domestic and global impacts – security, economic and environmental – are expected to become worse over the coming decades.
Growing US and global energy demands need to be met and anticipated impacts of climate change must be avoided all at an affordable price while avoiding conflict with other nations that have similar goals

5. Overview III Approach taken
Examine the current and prospective landscape of American energy policy from:
Tax incentives and mandates at the federal and state level to promote alternative energies
Foreign policies designed to ensure that markets and cooperative agreements control the supply and price of energy resources

6. Overview IV
Look at variety of energy related challenges facing U.S. and argue that public policies designed to enhance energy security have at the same time produced greater insecurity in terms of
Fostering rising (and potentially unmet) energy needs
National security threats
Economic vulnerability and
Environmental dangers

7. Energy Security as a Concept I
Energy security can be defined in a variety of ways:
Narrow definition
Relative abundance and ready access for a nation
Broad definition
Range of concerns comprising
Energy type and quality,
Affordability,
Cleanliness vis-a-vie environmental degradation
Diversity of sources and reliability of the supply chain and infrastructure

8. Energy Security as a Concept II
Authors chose broad definition
Energy security refers to the ability to obtain
Abundant,
Reliable,
Affordable
Diversified supplies of energy (in terms of both fuel types and their geographic sources
While also meeting goals of
Achieving environmental sustainability and
Enhancing energy independence

9. Energy Security as a Concept III
Energy independence – controversial term meaning different things to different people
Usually something in between total energy self-sufficiency and the diminished role of foreign-supplied oil
At present economic and national security of US is largely dependent upon fossil fuels, especially oil
Global demand for and completion over these resources is growing
Central argument
Effort to achieve energy security contains its own contradictions and obstacles – the energy security dilemma.

10. Energy Security as a Concept IV
Energy security dilemma – circumstance in which the pursuit of such security involves goals and tradeoffs that can be
Inherently contradictory as well as
Costly and inconvenient.
Rather than focusing primarily on geopolitics aim of volume is examine this dynamic as it plays out in the U.S.
That is the way in which energy markets operate, but which is also both a response and contributor to this dilemma

11. Energy Security as a Concept V
The market plays a critical role in both driving and responding to the diverse elements of energy security
Market for energy however high complex global construct characterized by many competing interests and values
As society demands an abundant supply of reliable, modestly price energy that does as little environmental damage as possible we turn
Not only to the market and technology to meet these demands but also
Governments that will through public policy shape conditions under which global and national markets operate – especially when expectations are not being met by market-based incentives in play

12. Energy Security as a Concept VI
Government policy can distort markets in unfavorable and unproductive ways
However government intervention has been successful in addressing problems of:
Market failure
Inequity and
Adverse social impacts
In democracies governments tend to represent values of their citizens.
Government policy becomes a principal method of recognizing and reinforcing those preferred outcomes that are most important to citizens

13. Energy Security as a Concept VII
Example – oil shocks of the 1970s
Greatly affected consumer perspectives on energy as a policy priority, and
Had a major impact on public policy formation
When petroleum supplies tight and price spikes occurred, US
Imposed price controls and
Developed the Strategic Petroleum Reserve (SPR) and
At various times US presidents have released petroleum reserves from SPR to affect oil availability at refineries and prices at the pump

14. Energy Security as a Concept VIII
Sometimes energy markets themselves have proven to be a threat to energy supply, prompting public policy intervention
Case of the deregulation of the California electricity market in the late 1990s
Enron was one of the major energy traders in the California market and active in energy markets nationwide
Enron’s market manipulation and fraudulent accounting practices led to the failure of the energy market with rolling blackouts and the need for state government intervention to stabilize energy supply through purchase of highly inflated energy contracts

15. Conceptualizing Energy Security I
Absolute energy security not an achievable state
However a continuum of a range of state or conditions between energy security (desired) and energy insecurity (not desired)
Each point along the continuum poses its own benefits, costs and risks of failure
Every state or condition poses some form of risk to energy availability and price as well as their associated political, economic and environmental impacts.
Various authors use this framework as the starting point in their definition of energy security.

16. Conceptualizing Energy Security II
Daniel Yergin – broad and inclusive definition
Objective of energy security to
assure adequate, reliable supplies of energy at reasonable prices, and
in ways that do not jeopardize major national values or objectives
Focus of energy security concerns is on the shocks or interruptions in supply that can lead to sudden sharp decreases in supply and impose heavy economic and political costs
This definition of energy security demands a great deal for absolute satisfaction

17. Conceptualizing Energy Security III
Does the definition ask too much?
Possible that energy supplies will reflect the cost not only of current supplies, but also of ensuring future supplies
That objective could be accomplished through regular exploration for new energy resources or through intensive efforts to protect supply chains
If these costs rise, likely they will be passed on to consumer in form of higher prices
Is a possibly elevated per unit price for energy something that is “reasonable”?
From position of free market energy trader the price would be very reasonable
Consumers might hold a different view.

18. Conceptualizing Energy Security IV
Yergin’s broad definition also points to the role of “values”
A unit of energy is fully fungible in any market and holds no single national identity
Once the energy source enters the free market, energy simply a commodity to be bought, sold, or traded and used by the final purchaser in the chain running from original source to final buyer
The energy source might be reasonably priced and represent an excellent source of regular and reliable energy supply Yet the energy provider – the leaders of the energy exporting nation might be human rights violators
Would bother some consumers if they knew the situation

19. Conceptualizing Energy Security V
After assessing several other approaches to energy security authors go on to develop their own definition that centers on several components:
Abundance of energy supplies
Reliability of energy sources
Affordability of energy sources
Diminishing the human and environmental impacts of energy production and use
Diversification of energy sources