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Part I
Managing Energy Security
An Overview
Part I of this book addresses energy security from three distinct perspectives. The first chapter discusses the significance of energy as critical infrastructure. The key types of energy – both non-renewables and renewables – and elements of risk management are duly explained. A historical overview is duly covered.
The second chapter addresses the key threat types of security and safety, and covers government agencies pertinent to energy and energy security, and the respective regulations.
The third chapter provides a mapping of the global energy from a geopolitical and economic landscape, whereas key production and consumption regions are duly covered.
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1 Energy as a Critical Infrastructure Sector
By the fall of 1918, it was clear that a nation’s prosperity, even its very survival, depended on securing a safe, abundant supply of cheap oil.
Albert Marrin, Black Gold: The Story of Oil in Our Lives
Introduction: Defining Energy, Energy Security and Infrastructure
Energy news is among the most prominent topics featured on media headlines, yet covering this complex subject generates a myriad of questions as to the geopolitical, economic, commercial, regulatory, operational, technical and other aspects of energy.
This book aims to encompass such transdisciplinary topics from an energy security perspective, but also to answer questions like the following:
1 What is the definition of energy security, and how is it associated with the geopolitical, socioeconomic, environmental and development strategies of a nation?
2 What is energy mix, and how does it contribute to national energy security?
3 What is the Triple-E concept, and how does energy security fit into the equation?
4 Why do oil price fluctuations affect the global economy?
5 How come industries and nations complain when oil prices peak, yet governments and economic empires collapse when oil prices are low?
6 What are the energy market cycles, and at which stages in the cycle do energy security systems become more vulnerable?
7 What are the layers of defense for national energy security?
8 Why do governments pursue energy independence as a top priority to their political legacy?
9 Why is the 21st century the era of energy independence?
And while this book addresses these and a plethora of other topics, the deluge of political, scientific and economic information seems to outpace the development of scientific and industrial tools adequate to gather and analyze these advances.
Defining Energy Security
The concept of energy security is intricate as it may be perceived from a geopolitical, socioeconomic and commercial development, environmental protection, as well as from an emergency and survival perspective.
The International Energy Agency (IEA) defines energy security as the continuous accessibility to energy sources at a reasonable, inexpensive price. From a long-term perspective, energy security is attained by pursuing appropriate investments in a timely manner to provide power consistent with financial growth and environmentally friendly specifications. From a short-term perspective, energy security focuses on the nation’s or industry’s capacity to respond instantly to unanticipated shifts in the supply-demand equilibrium. Per IEA, emergency response is essential to safeguard our systems from vulnerabilities caused by such disruptions. (IEA 2016d)
Chapter 3 of this book will duly analyze the geopolitical, economic, and social perspectives of energy security. However, in order to define the concept of energy security, this section will provide a concise introduction to these disciplines.
The Pyramid of Global Energy Security
The Pyramid of Energy Security demonstrated in Figures 1.1a and 1.1b pertains to the interrelated and equally significant notions of energy sustainability, independence, efficiency and affordability.
These aspects are interrelated, hence the greatest challenge and opportunity for energy leaders and decision makers is to strike a perfect balance between different aspects of energy activities at a national, corporate, societal and domestic level.
1 Energy sustainability: Pertains to a nation’s or an industry’s ability to continuously supply and use energy without any threats, intentional or unintentional, that would potentially harm a system’s energy supply chain. Most importantly, it ensures that contemporary supply does not sacrifice, eliminate or negatively impact the energy availability or sustainability of a nation’s succeeding generations.
Energy sustainability, or the ability to use diverse sources of energy around the globe, is the outcome of each country’s economic and currency robustness, as well as their natural energy deposits. Be it natural gas, oil, coal or timber, a country has a fair chance of utilizing these as fundamental energy sources. As an illustration, at least 2.7 billion people, accounting for 38% of the global population, will be using solid biomass for cooking, thus causing interior pollution and open fires in inadequately ventilated spaces, with high death rates. The majority of these populations are in developing Asia and sub-Saharan Africa.
If energy availability is present, affordable energy can enhance a nation’s development level and purchasing power parity (PPP). Nevertheless, affordability is pointless if the energy supply is questionable, characterized by scarcity and irregular supply due to unforeseen disruptions and delays. Despite the developing technological advancements, several power failures have occurred in different parts of the world, such as the two-day Puerto Rico blackout due to a massive fire at a power plant affecting 3.5 million people (September 2016), or the 140 million people affected by Pakistan’s blackout. While most of the modern-day blackouts are triggered by extreme weather conditions, sometimes overloaded electricity interconnectors cause large-scale disruptions. As an example, in September 2016 South Australia suffered a massive blackout due to severe storms which caused the collapse of major transmissions lines. The cost of the disaster was $367 million or $120,000 per minute of outage. It is worth noting that the outage was prolonged as the wind farms were switched off as a safety precaution during the hurricane (Castello, 2016).
To ensure the uninterrupted availability and use of energy, nations, industries and households need to have options. The availability of contingent energy sources ensures that even when the primary energy source is attacked or breaks down an alternative energy source will be readily available. Availability is defined as a nation’s or consumers’ ability to access energy resources in a timely and sustainable manner, subject to free trade agreements.
Since energy is a global commodity, security should be attained throughout the global supply chains, through infrastructure, superstructure, technologies and regulations that will facilitate the safe, secure, reliable and environmentally viable exploration, transportation and distribution of different energy products. Here, security pertains to reliable, sustainable and readily available energy regardless of the volume and regardless of the price (dollars per unit).
Finally, contingency planning must be in place, containing solutions for substitute supplies and alternative resources, storage and networks, in case of disruptions in the original systems. Based on the above, energy accessibility is achieved in the presence of a reliable, sustainable power supply, whereas affordability may not be relevant or influential enough in the presence of scarcity or disruptions.
2 Energy independence: Pertains to a nation’s or an industry’s autarky in acquiring sufficient energy quantity and type, from reliable sources.
a Energy dependence from a geopolitical perspective entails a nation’s reliance upon another for the provision of energy. Dependence is caused by market monopolies and oligopolies, price leveraging, supply disruptions and political strategies to leverage a nation’s supplies in order to obtain financial, diplomatic or other privileges.
b Inelastic demand is the condition where the demand for energy remains steady, regardless of the price fluctuations. When this phenomenon is present, it suggests that the energy suppliers can leverage their position by increasing the energy prices, under the certainty that buyers will still conduct the purchase as they do not have substitute suppliers. A nation’s energy dependence results into severe economic, commercial and supply-chain problems.
c The following factors improve a nation’s chances in becoming energy independent:
i The increasing number of global energy suppliers for non-renewable energy, and the industry’s ability to un-tap unconventional energy (deep offshore, severe weather conditions, bitumen and other unconventional energy types, etc.).
ii The increasing growth of dual or triple fuel burning in technologies, i.e., ocean-going ships burning Intermediate Fuel Oil (IFO), Marine Diesel Oil (MDO), and Liquefied Natural Gas (LNG).
iii The increasing growth of renewable energy technologies and methods.
Energy independence is a key priority for governments and political agendas; however governments face certain challenges in an effort to ensure energy security and independence.
a First, there is a matter of leveraging: Most governments typically own 20% of the national energy infrastructure and superstructure, whereas 80% of the nation’s grid and supply chains belong to the private sector and international corporations. Hence, governments may be at a leveraging disadvantage when nego...
