Energy Security Blog

The International Energy Agency (IEA) has recently published a MOdel of Short-term Energy Security (MOSES) developed by Jessica Jewell. MOSES adopts a novel systemic view of energy security where risks and vulnerabilities affect and shape each other. It uses some 30 quantitative indicators  to describe different configurations of risk factors and resilience capacities. In line with IEA’s “comprehensive approach to energy security”, MOSES focuses on diverse  fuels and carriers and can in future be extended to electricity and energy end-uses. By grouping countries with similar “energy security profiles”, MOSES depicts the energy security landscape for a region or a group of countries. MOSES can be used to identify energy security policy priorities, as a starting point for national energy security assessments, and to track the evolution of a country’s energy security profile or the global energy security situation overtime.

Does energy security have the ‘affordability dimension? On the one hand, energy security policy rhetoric often mentions ‘reasonable’, ‘competitive’, ‘secure’ or ‘affordable’ prices. On the other hand, most of the concrete energy security policy measures such as energy taxes or promoting more expensive renewable energy sources lead to higher rather than lower energy prices. How can this paradox be explained? Does energy security really have an economic dimension? If so, is it about ‘affordable’ prices? Our analysis, summarized below, shows that it is competitive and stable rather than affordable prices that are the focus of real-life energy security policies in Europe.

There are several economic considerations involved in energy security policies. To begin with, energy security policy measures naturally have a price tag attached to them. Sometimes, rhetoric references to ‘affordability’ simply signal that policy makers are not prepared to pay for extravagantly expensive solutions for energy security. In this way, economic considerations are a constraint rather that a goal of energy security policies (in the same way as they are constraints to all other energy policies). But there are also additional economic aspects to energy security.

Let us start with recalling that energy security is about protecting vital energy systems from such disruptions that can seriously destabilize them. Which energy systems can be destabilized by energy prices? In developed countries, this is first of all industrial use of energy, especially in energy-intensive industries where energy prices significantly affect profitability. An increase in energy price may affect national economic security if the economy relies on energy intensive industries. This was what made Ukraine and Belarus so sensitive to changes in the prices of Russian gas in 2006-2009, triggering a series of disputes and physical disruptions of gas supplies to these countries and eventually to Europe. A close look at Belarusian and Ukrainian economies shows that the mainstay of their exports are energy intensive commodities: steel and aluminum (in Ukraine) and potash fertilizers (in Belarus) which entirely explains their nervouseness about the price of imported natural gas.

An interesting aspect of these Eastern European stories is that the viability of energy systems in both Ukraine and Belarus depends on supplies of Russian gas significantly below its market price. In contrast, the European Union is concerned about keeping the price of energy at the “market” level. The explanation of this policy goal, often found in the EU policy documents, is that European industries compete at the global market. Therefore, the logic goes, they will not survive if their energy inputs cost more than those of their competitors.

Thus, it is maintaining a ‘competitive’ energy price (i.e. the price which would allow European industries to globally compete) which is the focus of energy security policies in Europe. Almost by definition, a ‘competitive’ price is achieved by ensuring a competitive market, both home and abroad. It is therefore no surprise that measures to promote energy markets are most commonly found in energy security policies. (These measures have the additional rationale of ensuring the diversity of actors so that no one has too much power). European policy makers see market distortions, be it energy subsidies in China or monopolist behavior of Gazprom rather than high prices of energy as economic threats to energy security.

Energy security policies aim at not only competitive but also at stable energy prices. This is a separate concern since free markets do not necessarily ensure price stability (often quite the contrary). Here is an interesting dilemma: directly stabilizing energy prices would go against the market rhetoric which requires prices to be ‘competitive’ and ‘flexible’. However, at least in principle, there is a solution for minimizing the impacts of energy price fluctuations on the economy even in the absense of taxes and subsidies. This solution is called energy efficiency. More efficient energy systems require less energy per unit of output and therefore are less affected by changes in energy prices. In fact, energy efficiency not only protects against price fluctuations but may also support competitiveness, at least in the high energy price environment . It is therefore no surprise that most countries, in the East as well as in the West have energy efficiency measures included in their energy security policy packages.

To summarize, it is competitiveness and stability of prices rather than ‘affordability’ which are linked to energy security in minds of European policy makers. On other continents, affordability may be an aspect of security, since too high energy prices may lead to social unrest (as was indeed allegedly the case in Kyrgyzstan in Spring 2010). Whether this is the case can be investigated by analyzing energy security policies of countries in question.

This is the abstract of our article “The three perspectives on energy security: intellectual history, disciplinary roots and the potential for integration” recently published in the Current Opinion in Environmental Sustainability

Scholarly discourses on energy security have developed in response to initially separate policy agendas such as supply of fuels for armies and transportation, uninterrupted provision of electricity, and ensuring market and investment effectiveness. As a result three distinct perspectives on energy security have emerged: the ‘sovereignty’ perspective with its roots in political science; the ‘robustness’ perspective with its roots in natural science and engineering; and the ‘resilience’ perspective with its roots in economics and complex systems analysis. At present, the energy security challenges are increasingly entangled so that they cannot be analyzed within the boundaries of any single perspective. To respond to these challenges, the energy security studies should not only achieve mastery of the disciplinary knowledge underlying all three perspectives but also weave the theories, methods and knowledge from these different mindsets together in a unified interdisciplinary effort. The key challenges for interdisciplinary energy security studies are drawing the credible boundaries of the field, formulating credible research questions and developing a methodological toolkit acceptable for all three perspectives.