Energy Security: 10+1 Principles

by Patrick Truffer. Patrick Truffer graduated from the Swiss Federal Institute of Technology in Zürich with a Bachelor of Arts in Public Affairs and completes a Master of Arts program in International Relations at the Freien Universität Berlin.

In Switzerland, economic policy is counted as one of eight security-political instruments (see also “Sicherheitspolitische Veränderungen und Konsequenzen für die Schweizer Armee – Teil 1“, offiziere.ch, 07.10.2010). Because of the increasing demand, the scarcity and the power-political significance of energy resources, Energy Security increasingly matters in the security-political area. Based on the writings by Daniel Yergin, this short essay will explain the basic principles of Energy Security and their implementation in the EU.

The European natural gas network: 186,132 km, 2,649 nodes (compressor and city gate stations, LNG terminals, etc.), 3,673 Pipeline segments. The existing network is shown in blue; planned pipelines in red. Population density is represented in dark green; larger urban areas are coloured light blue (Source: R. Carvalho, L. Buzna, F. Bono, M. Masera, D.K. Arrowsmith and D. Helbing, "Resilience of natural gas networks during conflicts, crises and disruptions", presented by R. Carvalho at the Open University, April 4, 2014).

The European natural gas network: 186,132 km, 2,649 nodes (compressor and city gate stations, LNG terminals, etc.), 3,673 Pipeline segments. The existing network is shown in blue; planned pipelines in red. Population density is represented in dark green; larger urban areas are coloured light blue (Source: R. Carvalho, L. Buzna, F. Bono, M. Masera, D.K. Arrowsmith
and D. Helbing, “Resilience of natural gas networks during conflicts, crises and disruptions“, presented by R. Carvalho at the Open University, April 4, 2014).

The International Energy Agency (IEA) defines “Energy Security” as “the uninterrupted availability of energy sources at an affordable price”, leaving open what “affordable price” actually means. In contrast, Yergin argues for a broad definition of Energy Security. For example, Energy Security depends on the standpoint of the observer: residential, commercial and industrial consumers are interested in a stable price for a secured supply, while producers are interested in a steady demand and a secure income etc.. On that basis, Yergin elaborates the different aspects of developing a concept for energy security.

In the scope of developing the concept, Yergin recommends ten basic principles for decision-makers. He focuses on the situation of the US, but his remarks could be analogously implemented to the conditions within the EU. In contrast to the US, the EU never had the illusion that their energy market could be independent from the global market. On the contrary, in the liberalized and globalized market, the EU sees advantages and is trying to promote these using the Energy Charter Treaty and the Third Energy Package.

The diversification of sources, supply routes and infrastructure is one of the main guarantors and the starting point of a concept for energy security. The efforts of the EU to change their energy mix in favour of renewable energy sources highlight the importance of diversification of all energy sources (Stacy Closson and Daniel Möckli, “Energy Security of the European Union,” CSS Analysis in Security Policy 3, no. 36 (June 2008)). The presence of a potentially independent, robust, inland energy industry as well as investment in research and development would be advantageous. However, disruptions in supply and service cannot be completely excluded. Strategic reserves, the provision of high quality information and a contingency to bridge disruptions are therefore necessary. A liberal energy market ensures that supply and demand remain in balance. This does, however, entail price increases, which could counter the definition of energy security. An ideal energy market would also require a well-developed distribution and transportation network so that energy can be traded worldwide. Ultimately, increased demand can only be covered if funding and production capacity can also be increased. In an ideal situation, an interdependence of consumers and suppliers would be created so that both will be interested in the secure flow of energy. However, the current tensions between the EU and Russia indicate that this does not represent a long-term guarantee. The cooperative relations among importing states is therefore more important, something which is supported by the IEA, for example.

The 10 principles of Energy Security by Daniel Yegin

  1. Diversification (most important principle).
  2. Liberalisation (“there is only one oil market”).
  3. The need of a security margin.
  4. A well functioning energy market.
  5. Building relationships with exporting nations.
  6. Cooperation among importing nations.
  7. The importance of high quality information.
  8. A robust domestic industry.
  9. Research and development.
  10. Planning for disruptions.

— based on Daniel Yergin, “Energy Security and Markets,” in Jan H. Kalicki and Goldwyn David L. Energy and security: strategies for a world in transition, (Washington, D.C.: Woodrow Wilson Center Press, 2013, 2nd edition): 69–87.

The EU is dependent on the import of energy sources, with Russia being by far the largest supplier of crude oil (35%). Russia also plays a key role in the EU’s import of natural gas (30%) and solid fuels (26%; source: European Commission, “EU Energy in Figures, Statistical Pocketbook,” 2013, 24). Norway, the second most important supplier of natural gas (28%), would not be able to compensate for a loss of Russian natural gas (Tord Lien, “Norwegen dämpft Hoffnungen auf erhöhte Gaslieferungen nach Europa,” EurActiv.de, 31 March 2014). Nevertheless, energy security is a relatively new policy area for the EU. For example, strategic energy reserves were the responsibility of the individual member states or were regulated by other international or regional organisations. For example, NATO has specified that its member states ensure a bridging of three months for major energy resources and the IEA direct their Member States to maintain strategic crude oil reserves equal to 90 days’ import levels. Only since 2013 has the Council of the European Union required each member state to maintain crude oil reserves equal to 90 days’ import levels or 61 days’ consumption levels (the greater quantity applies). The European Commission addressed energy security extensively for the first time only in March 2006 as part of the “Energy Policy for Europe“, which focused on diversifying energy sources, liberalising the energy market, increasing the solidarity of the Member States in the supply security, increasing energy efficiency (an important area ignored by Yergin) and promoting research. The liberalisation of the energy market has been driven by the adoption of the third energy package, which calls for a separation of the production, transport, and distribution operations of the energy companies operating in the EU (David L. Goldwyn, “Refreshing European Energy Security Policy: How the U.S. Can Help“, Brookings Institution, 18 April 2014).

Natural gas pipelines, LNG terminals and storage caverns in Europe (Source: KBB Underground Technologies GmbH).

Natural gas pipelines, LNG terminals and storage caverns in Europe (Source: KBB Underground Technologies GmbH).

Further measures for increasing energy security could be realised in late 2009 with the implementation of the Treaty of Lisbon, which further extended the powers of the EU in this area. For example, the European Commission’s European Energy Programme for Recovery supports the renewal and expansion of energy infrastructure within the EU (European Commission, “Report from the Commission to the Council and the European Parliament on the implementation of the European Energy Programme for Recovery“, COM (2010)191 final, 27 April 2010). It also includes improvements to the natural gas infrastructure to improve the flow of gas among the member states and construct LNG terminals for the import of gas from the US. The LNG terminals will begin operating between 2016 and 2020, which should enable the diversification of gas imports (David L. Goldwyn, “Refreshing European Energy Security Policy: How the U.S. Can Help“, Brookings Institution, 18 April 2014).

The implementation of measures to increase energy security in the EU is only just beginning. In 2010, the European Commission decided that the measures taken so far were inadequate and formulated a revised energy strategy for the period up to 2020. Increasing energy efficiency was given top priority followed by liberalising the energy market, developing infrastructure, increasing research efforts, promoting renewable energy and strengthening the energy aspects of foreign policy (European Commission, “Energy 2020: A strategy for competitive, sustainable and secure energy“, COM(2010) 639 final, 10.11.2010).

Conclusion
The ten principles of Yergin include the key points for formulating a strategy to ensure energy security. These are recognisable in the strategies of the EU. The current implementation, however, is still in its infancy, not least because the EU first acquired the necessary authority with the Treaty of Lisbon. Diversification efforts are particularly challenging, as these require large investments in infrastructure and renewable energy. “Energy 2020” will significantly enhance energy efficiency, an aspect not considered by Yergin, but which should be incorporated as an eleventh principle.

References
Daniel Yergin, “Energy Security and Markets,” in Jan H. Kalicki and Goldwyn David L. Energy and security: strategies for a world in transition, (Washington, D.C.: Woodrow Wilson Center Press, 2013, 2nd edition): 69–87.

This entry was posted in Energy Security, English, Patrick Truffer.

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