Methodologies for Quantifying Energy Security in the Power

Sector

William BlythWilliam Blyth

2424thth April 2005 April 2005

Why quantify energy security?

Interested in quantifying in interactions between Interested in quantifying in interactions between energy security and climate change policiesenergy security and climate change policies

Many energy policy issues linked through the Many energy policy issues linked through the technology / fuel mix. Develop tools for technology / fuel mix. Develop tools for integrated approach to energy policy making. integrated approach to energy policy making.

Can already quantify climate change impacts of Can already quantify climate change impacts of technology / fuel mix – needed a quantitative technology / fuel mix – needed a quantitative measure for energy securitymeasure for energy security

Energy policy linkages

Coal

Oil

Gas

Nuclear

Renewables

Climate change mitigation

Geopolitical energy security

Power systemflexibility and reliability

• Hypothesis – use fuel / technology Hypothesis – use fuel / technology mix as linking factormix as linking factor

Difficulties associated with quantifying energy security

Many different aspects to energy securityMany different aspects to energy security

No generally accepted definition - depends on No generally accepted definition - depends on local circumstances and political prioritieslocal circumstances and political priorities

Absolute quantification probably impossibleAbsolute quantification probably impossible

Try to develop method which can track trends Try to develop method which can track trends over time, and shows response to policy actionsover time, and shows response to policy actions

What approach did we take?

Avoid attempt to quantify externality in financial Avoid attempt to quantify externality in financial termsterms

Instead focus on underlying causes of energy Instead focus on underlying causes of energy security concernssecurity concerns

Focus on two aspects Focus on two aspects Geopolitical energy security in primary Geopolitical energy security in primary

(fossil) fuel markets(fossil) fuel marketsReliability of power supplyReliability of power supply

Geopolitical energy security

Underlying policy concern: concentration of primary Underlying policy concern: concentration of primary energy resources and resulting market power of supply energy resources and resulting market power of supply countries countries

Focus on risk of price distortion rather than physical Focus on risk of price distortion rather than physical supply disruptionsupply disruption

Take account of political stability of suppliers and Take account of political stability of suppliers and flexibility of buyers to switch to different suppliersflexibility of buyers to switch to different suppliers

Domestic supply treated as part of the market – i.e. does Domestic supply treated as part of the market – i.e. does not assume that domestic supply insulates from world / not assume that domestic supply insulates from world / regional market priceregional market price

Defining the market

Energy SupplyMarket

(oil/gas/coal separate markets)

1

2

3

IEA (oil)

Country X domestic supply(zero geopolitical risk)

Country X demand

Concentration of suppliers – world oil market

0

500

1,000

1,500

2,000

2,500

3,000

OP

EC

RU

SS

IA

NO

RW

AY

ME

XIC

O

OM

AN

All

Oth

ers

OP

EC

RU

SS

IA

NO

RW

AY

ME

XIC

O

KA

ZA

KH

ST

AN

All

Oth

ers

OP

EC

RU

SS

IA

KA

ZA

KH

ST

AN

ME

XIC

O

NO

RW

AY

All

Oth

ers

OP

EC

RU

SS

IA

KA

ZA

KH

ST

AN

AN

GO

LA

NO

RW

AY

All

Oth

ers

2001 2010 2020 2030

Mto

e

Concentration of suppliers – world coal market

-

20

40

60

80

100

120

140

160

180

Co

untr

y 1

CH

INA

SO

UT

HA

FR

ICA

IND

ON

ES

IA

Co

un

try

4

All

Oth

ers

Co

un

try

1

CH

INA

SO

UT

HA

FR

ICA

IND

ON

ES

IA

CO

LO

MB

IA

All

Oth

ers

Co

un

try

1

CH

INA

SO

UT

HA

FR

ICA

IND

ON

ES

IA

CO

LO

MB

IA

All

Oth

ers

Co

untr

y 1

CH

INA

SO

UT

HA

FR

ICA

IND

ON

ES

IA

CO

LO

MB

IA

All

Oth

ers

2001 2010 2020 2030

Mto

e

Concentration of suppliers – S. European gas market

-

100

200

300

400

500

600

RU

SS

IA

ALG

ER

IA

NO

RW

AY

IND

ON

ES

IA

NE

TH

LAN

D

All

Oth

ers

RU

SS

IA

NO

RW

AY

ALG

ER

IA

S. A

RA

BIA

IND

ON

ES

IA

All

Oth

ers

RU

SS

IA

NO

RW

AY

S. A

RA

BIA

IRA

N

ALG

ER

IA

All

Oth

ers

RU

SS

IA

S. A

RA

BIA

NO

RW

AY

IRA

N

NIG

ER

IA

All

Oth

ers

2001 2010 2020 2030

Mto

e

Trends in geopolitical energy security measure

0.00.10.20.30.40.50.60.70.80.91.01.11.21.3

2001 2010 2020 2030

Mar

ket

con

cen

trat

ion

mea

sure

s

Coal average

Gas

Oil

0.00.10.20.30.40.50.60.70.80.91.01.11.21.3

2001 2010 2020 2030

Mar

ket

con

cen

trat

ion

mea

sure

s

Coal average

Gas

Oil

Factors excluded from measure

Direct price effects – volatility, balance of supply Direct price effects – volatility, balance of supply & demand etc& demand etc

Terms of trade effects for net exportersTerms of trade effects for net exporters

Dependency on infrastructure development – e.g. Dependency on infrastructure development – e.g. LNG investmentsLNG investments

Physical security (e.g. infrastructure Physical security (e.g. infrastructure concentration)concentration)

Policy driver interactionsClimate change and

geopolitical energy security factor

0.00

0.10

0.20

0.30

0.40

0.50

0.60

2001 2010 2020 2030

GE

S f

acto

r

0.5

0.6

0.7

0.8

0.9

1

1.1

1.2

1.3

1.4

CO

2 em

issi

on

s tr

end

Country 1

Country 3

Country 2

Country 4

Country 1 - CO2

Country 3 - CO2

Country 2 - CO2

Country 4 - CO2

• Test policy synergiesTest policy synergies• Analyse root causes of trendsAnalyse root causes of trends

Reliability of Energy Supply

Reliability of complex system depends on many factorsReliability of complex system depends on many factors

Broadly based around ancilliary servicesBroadly based around ancilliary services

Flexibility of generation (response rates)Flexibility of generation (response rates) Intermittency and capacity creditIntermittency and capacity credit Voltage stability servicesVoltage stability services Transmission securityTransmission security Black-start servicesBlack-start services

Broad-brush assumptions…

Intermittency…Intermittency…

Capacity credit = how much of the average annual power Capacity credit = how much of the average annual power output can be relied on at times of peak load?output can be relied on at times of peak load?

WindWind 50%50%

SolarSolar 50%50%

All othersAll others 100%100%

Flexibility…Flexibility…

Plant typePlant type Ramp rate - % of rated output per minuteRamp rate - % of rated output per minuteHydroHydro 50-100%50-100%Gas turbinesGas turbines 10-20%10-20%CoalCoal 1-3%1-3%NuclearNuclear N/AN/A

Intermittency

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

2001 2010 2020 2030

Ba

ck

-up

Ca

pa

cit

y

(% o

f to

tal i

ns

talle

d c

ap

ac

ity

)

Country 1 Country 2Country 3 Country 4

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

Flexibility

0%

5%

10%

15%

20%

25%

30%

2001 2010 2020 2030

Av

era

ge

ra

mp

ra

te

(% o

f g

en

era

tio

n p

er

min

ute

)

6%

8%

10%

12%

14%

Country 2 (1st axis) Country 4 (2nd axis)

Country 3 (2nd axis) Country 1 (2nd axis)

But… reliability is system specific

Impact of adding any given technology depends Impact of adding any given technology depends on what is already in the systemon what is already in the system

Reliability specifically managed by system Reliability specifically managed by system operatorsoperators

Quantification (of costs) possible at a detailed Quantification (of costs) possible at a detailed level, but headline indicators are of limited valuelevel, but headline indicators are of limited value

Conclusions and next steps

Quantified approach can help to structure thinking about Quantified approach can help to structure thinking about energy securityenergy security

Identify key driversIdentify key drivers TrendsTrends Effects of policy actionEffects of policy action

Needs to be analysed at national level, taking account of Needs to be analysed at national level, taking account of energy system, market structure and policy prioritiesenergy system, market structure and policy priorities

Case Studies being undertaken with IEA member countries Case Studies being undertaken with IEA member countries using the Geopolitical Energy Security measure to test its using the Geopolitical Energy Security measure to test its usefulness as a policy analysis toolusefulness as a policy analysis tool