How to combine energy security with reduced emissions
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
How to combine
energy security
with reduced
emissions
EDITED BY
DANIEL ENGSTROM STENSON
EUROPE’S ENERGY FUTURE
How to combine energy security with reduced emissions
ISBN: 978-91-87379-34-5 Print: Multiprint Design: Ivan Panov | panstudio@gmail.com Cover Photo: istockphoto.com © 2015 European Liberal Forum. All rights reserved This publications can be downloaded for free on www.liberalforum.eu or www.fores.se. Single copies can also be ordered in print by emailing brev@fores.se Published by the European Liberal Forum asbl with the support of Fores, Neos-lab and Friedrich Naumann Foundation. Co-funded by the European Parliament. Neither the European Parliament nor the European Liberal Forum asbl are responsible for the content of this publication, or for any use that may be made of it. The views expressed herein are those of the author(s) alone. These views do not necessarily reflect those of the European Parliament and/or the European Liberal Forum asbl. 2
EUROPE’S ENERGY FUTURE – HOW TO COMBINE ENERGY SECURITY WITH REDUCED EMISSIONS
About the authors..................................................................................4
About the publishers..............................................................................5
INTRODUCTION – EUROPE’S ENERGY FUTURE..............................6
CONTENT MEASURING EUROPEAN SECURITY OF ENERGY SUPPLY.........10
Introduction...........................................................................................11
Energy portfolio and energy security in EU......................................11
A measure of energy security............................................................13
Beyond energy portfolio/consumption and energy security............14
Conclusion........................................................................................... 18
THE AUSTRIAN ENERGY
POLICY FROM A EUROPEAN PERSPECTIVE................................ 20
Introduction...........................................................................................21
Austria’s energy profile........................................................................21
Current energy issues for Austria......................................................25
The next energy challenges.............................................................. 29
Conclusions..........................................................................................31
ENERGY SECURITY AND CLIMATE CHANGE
IN BULGARIA: THE BULGARIAN ENERGY MARKET...................... 32
Introduction.......................................................................................... 33
Bulgaria’s energy profile..................................................................... 33
Current energy issues for Bulgaria........................................................... 38
Future energy challenges...................................................................41
Conclusion.......................................................................................... 43
THE SWEDISH ENERGY MARKET................................................... 44
Introduction.......................................................................................... 45
Sweden’s energy profile..................................................................... 45
Current energy issues for Sweden................................................... 48
The next energy challenges.............................................................. 49
Conclusion............................................................................................51
CONCLUDING THOUGHTS AND WAY FORWARD..........................52
Cooperate - on all levels.................................................................... 53
Bibliography......................................................................................... 58
3About the authors Daniel Engström Stenson is the program manager for climate and environmental policy at Fores. He holds a mas- ters degree in International Relations from Malmö University, and has written several publications on international climate policy and emissions trading. Chloé Le Coq is an Assistant Professor at Stockholm School of Economics at Stockholm Institute of Transition Eco- nomics (SITE). Her main research interests are industrial organisation and experimental economics, with particular focus on the energy markets and their regulation. Her recent work includes empirical studies on energy security issues and experi- mental studies of the electricity auction. Rumiana Decheva is an international development expert. Her main research interests are the human rights, with par- ticular focus on the civil, political and social rights. Her recent work includes analysis of legislation for conformity with an- ti-discrimination principles. As a member of the team of the Norwegian University for Science and Technology (NTNU), she took part in the development of the current National Action Plan for Climate Change in Bulgaria. Lovisa Källmark is a Master student in Environmental Economics and Management at the Swedish University of Agricul- tural Sciences in Uppsala. Her main research interests are sustainable economic growth with a particular focus on renewa- ble energy sources and energy markets. Elena Paltseva is an Assistant Professor at Stockholm Institute of Transition Economics (SITE), Stockholm School of Economics and a Visiting Professor at the New Economic School, Russia. Her main research interests are political econom- ics, applied microeconomics and industrial organization. Her recent work includes theoretical and empirical studies of issues related to political economy of trade policy, public goods, natural resources and energy security. Ronald J. Pohoryles is Chairman of the board of directors of the ICCR Foundation and ass. Prof. for comparative political systems, experienced in social science research for more than 35 years. His research expertise covers European integration emphasising public policy analysis, science and technology with emphasis on internationalisation, green economy & environment and integrated assessment of technologies. 4
EUROPE’S ENERGY FUTURE – HOW TO COMBINE ENERGY SECURITY WITH REDUCED EMISSIONS
About the publishers
European Liberal Forum: The European Liberal Forum perous societies.
(ELF) is the foundation of the European Liberal Democrats, The Project Office for Southeast Europe of the Foundation
the ALDE Party. A core aspect of our work consists in issu- implements activities and programmes in Macedonia, Bul-
ing publications on Liberalism and European public policy is- garia, Romania, and Moldova in close cooperation with a
sues. We also provide a space for the discussion of Europe- multitude of local partners – liberal political parties, think-
an politics, and offer training for liberal-minded citizens. Our tanks, institutes, and civil organisations. Focus areas of our
aim is to promote active citizenship in all of this. current work on national and regional level are anticor-
Our foundation is made up of a number of European think ruption and transparency, freedom of media, economic en-
tanks, political foundations and institutes. The diversity of our trepreneurship, and education. On all these topics we pro-
membership provides us with a wealth of knowledge and is a vide political consultancy and communicate with our political
constant source of innovation. In turn, we provide our mem- partners on a constant basis. With a large number of man-
bers with the opportunity to cooperate on European projects ifold public activities and publications we strive to raise the
under the ELF umbrella. awareness on the principles of liberal democracy and to
We work throughout Europe as well as in the EU Neigh- foster civic engagement in our four project countries.
bourhood countries. The youthful and dynamic nature of ELF fnf-southeasteurope.org
allows us to be at the forefront in promoting active citizen-
ship, getting the citizen involved with European issues and NEOS Lab is the political academy of the liberal grass-roots
building an open, Liberal Europe. movement NEOS, and an open laboratory for new politics.
liberalforum.eu The main objective of NEOS Lab is to contribute to enhanc-
ing political education in Austria by providing a platform for
Fores —Forum for Reforms, Entrepreneurship and Sus- knowledge exchange and liberal political thinking on the
tainability – is an independent think tank dedicated to fur- key challenges and pathways of democracies and welfare
thering entrepreneurship and sustain able development states in the 21st century. Particular emphasis is placed on
through liberal solutions to meet the challenges and possibil- the core topics of education, a more entrepreneurial Aus-
ities brought on by globalization and global warming. Fores’ tria, sustainable welfare systems and democratic innovation.
main activities are to initiate research projects and public de- NEOS Lab conceives itself as a participatory interface be-
bates that result in concrete reform proposals in relevant pol- tween politics and society insofar as it mediates between
icy areas such as: environmental policy; migration; entrepre- experts with scientific and practical knowledge on diverse
neurship; economic policy and the digital society. policy issues and interested citizens. A network of experts
fores.se accompanies and supports the knowledge work of the di-
verse thematic groups and takes part in the think tank work
The Friedrich Naumann Foundation for Freedom is a Ger- of NEOS Lab.
man political foundation, which promotes liberal polices and NEOS Lab is the successor of the Liberal Future Forum,
political knowledge in 62 countries worldwide with the aim of which was previously a member of ELF.
consolidating liberal democracy and building free and pros- lab.neos.eu
51 INTRODUCTION – EUROPE’S ENERGY FUTURE Daniel Engström Stenson 6
EUROPE’S ENERGY FUTURE – HOW TO COMBINE ENERGY SECURITY WITH REDUCED EMISSIONS
This project was initiated in the summer of 2014. It was During 2015, the European Liberal Forum and its mem-
motivated by the observation that many of Europe’s long- bers Fores (Sweden), Neos-lab (Austria) and Friedrich Nau-
term challenges are connected to the supply of energy. mann Foundation Sofia (Bulgaria) organized three work-
Events in Ukraine, the European Union’s (EU) long-term cli- shops and are now delivering this publication with four
mate targets, and the findings and use of shale-gas in the chapters written by highly qualified experts on energy policy.
US all highlight the need for a thoroughly considered en- Energy security and carbon emissions reduction discus-
ergy policy for Europe. In 2015, the European Commission sions vary per individual European state, as countries have
launched its communication on an Energy Union, highlighting different preconditions and perspectives. For this project,
five priorities, of which many are addressed in this project: the three project partners shed light onto the different de-
bates and policies in Austria, Bulgaria and Sweden—coun-
• Supply security tries that resemble one other in terms of population, but dif-
• Integrated energy market fer in most other areas. In Austria, discussions on energy
• Energy efficiency security due to dependency on Russian gas are combined
• Emissions reductions with climate policies being relatively high on the agenda, al-
• Research, innovation and competitiveness though emissions reductions results are somewhat modest
to date. In Bulgaria, the energy security risk is not only de-
Europe is to a large extent dependent on imports to meet bated but a reality: Russia created a “cold winter” in 2009
its energy needs (the EU imports 53 per cent of the energy by interrupting the gas supply, an action which caused en-
it consumes). In 2012, Europe spent more than €400 billion, ergy poverty, bringing people to the streets and ousting gov-
the equivalent of around 3.1 per cent of its GDP, on fossil ernments. In Sweden, the topic of energy security is almost
fuel imports. Given the increased demand for energy around absent, and the debate on climate and energy is focused on
the globe, competition over energy is likely to increase. The the future of nuclear power and reducing carbon emissions.
political turmoil unfolding next to the EU’s borders, Ukraine These three cases give a sense of how energy realities look
to the east and the MENA region on the other side of the like around Europe.
Mediterranean , have also shed light on the risks of being In each country, the debate benefits from learning about
dependent on unreliable regimes for energy supplies. In par- discussions in fellow European countries. This report aims to
ticular the dependence on Russian gas has been much de- be a helpful contribution by presenting three country cases.
bated. With many countries being dependent on a single The report begins, however, with a more general discussion
supplier for gas, diversification of energy sources and sup- on energy security risks in Europe.
pliers is crucial for improving energy security for individual
countries as well as for the EU. Exploring supply regions for In chapter one, Chloe le Coq and Elena Paltseva, both
fuels, exploring new technologies, further developing indige- from SITE (Stockholm Institute of Transition Economics)
nous resources and improving infrastructure to access new at the Stockholm School of Economics, offer an index ap-
sources of supply are all contributing elements for increas- proach to characterising risks in energy supply. They show
ing the diversity and security of Europe’s energy sector. how this approach can be used to compare the energy se-
Furthermore, if Europe is serious about reducing its curity risks among EU countries, and to access the viability
emissions by 40 per cent by 2030, and by 80-95 per cent of political decisions. The authors focus primarily on the ex-
by 2050, Europe’s energy mix is in need of transition. This ternal dimension of energy security, that is, the risks associ-
requires a reduced use of fossil fuels, while the growth of ated with energy supplied by producers outside the EU. They
renewable energy and energy efficiency will be crucial for discuss different factors contributing to the energy securi-
moving towards a low carbon society. ty – such as energy dependency, concentration of suppliers,
7INTRODUCTION – EUROPE’S ENERGY FUTURE
transportation and political risks – and show how these fac- its carbon emission reductions target for 2012 by using a
tors can be combined into a single quantitative index, and flexible mechanism to compensate for the fact that its do-
why this approach is more precise than the traditional ener- mestic emissions in 2012 were 2,5 per cent above 1990 lev-
gy dependency approach. Applying the methodology to the els, rather than the -13 per cent stipulated in the Kyoto Pro-
EU Member States, they demonstrate that natural gas is the tocol. To reach the 2020 emissions reduction targets of -16
most risky fuel for EU external energy security. For example, per cent compared to 2005, Austria has implemented a Cli-
a few EU Member States, in particular in the eastern and mate Change Act with fixed ceilings for GHG emissions from
central parts of Europe, such as Hungary, Czech Republic 2013-2020. Identifying key future challenges in the area of
and Bulgaria, score high on the gas supply risk index, be- energy policy, Pohoryles highlights the import dependency
cause of highly concentrated gas imports from Russia. Le on Russian gas, and investments in energy infrastructure.
Coq and Paltseva also discuss the contribution of Member
States to the overall EU energy supply risks, and argue that In chapter three on Bulgarian energy policy, Rumiana
these are affected both by the individual risk exposure of Decheva notes that the energy market is only formally a lib-
the Member States and their relative size. In the above ex- eralised market. In reality, it remains a regulated market with
ample of natural gas, Czech Republic would be one of the regional monopolies and regulated electricity pricing in large
largest contributors to the EU-wide risk due to its high risk sectors of the economy. The regulated prices are aimed at
exposure. In contrast, Italy and Germany are less vulnerable keeping energy prices down to prevent energy poverty, but
to gas supply risks but are still large contributors to the EU- this has also meant little to no investments in the necessary
wide risk due to their size. The authors also discuss other infrastructure. However, the plan is to liberalise the electric-
challenges of the energy security, in particular, the interrela- ity market for households in the beginning of 2016. During
tion between the environmental targets and energy security. the “cold winter” in 2009, Bulgaria experienced the reali-
They point to the fact that while natural gas is the most risky ties of energy security risks when its gas supply from Rus-
fuel for the EU, it emits less carbon compared to the more sia was interrupted. Policy makers have yet to implement
secure oil and coal. Thereby, EU energy policies need to measures to build gas storage facilities and interconnectors
carefully assess the trade-offs between environmental goals to neighbouring countries that could help limit the depend-
and energy security. ency on Russian gas. In Bulgaria, a large share of house-
holds is unable to afford utilities, and using the World Bank’s
In chapter two, Ronald Pohoryles of the ICCR Foundation methodology, energy poverty is above 60 per cent. Bulgaria
provides insights into Austria’s energy policy, and begins by is on track to meet its climate targets. For the future, Deche-
explaining Austria’s longstanding opposition to nuclear ener- va identifies the discussion on whether to focus on nucle-
gy. Due to its gas imports and dependency on Russian gas, ar power or renewable energy as a key issue, and highlights
Austria is exposed to energy security risks, and like many regional integration as a way to reduce the dependency of
other countries also depends on imported oil and remains Russian energy.
a net importer of energy. On the other hand, Pohoryles al-
so shows that Austria is among the top European countries In chapter four, Lovisa Källmark and Chloe le Coq out-
for its share of renewable energy, which could be attributed line the case of the Swedish energy market. As an economy
more to its geography than political decisions. Transports, heavily dependent on fossil fuels, especially oil, Sweden has
industry and households together make up for more than 87 managed to change its energy profile. In particular, it has
per cent of the energy use in the country. The energy con- invested greatly in nuclear energy and has increased the
sumption is increasing but is outpaced by GDP, which means share of renewables by implementing the carbon tax in 1991.
energy intensity is improved. Austria has been able to meet Sweden is now, to a large extent, fossil free in electricity
8EUROPE’S ENERGY FUTURE – HOW TO COMBINE ENERGY SECURITY WITH REDUCED EMISSIONS
and heating. The transport sector, however, remains heav- ing the project. He identifies a number of key issues that
ily dependent on imported oil. The energy demand has re- need to be elevated in the debate around European ener-
mained stable over the last decade, with industry and hous- gy and climate policies. He stresses that the conditions and
ing being the two main consuming sectors. The reduction of capabilities differ among countries. He therefore argues that
carbon emissions since 1990 by around 25 per cent is al- the pan-European approach of the Energy Union needs to
so worth noting. In particular, the reduction of 80 per cent be complemented by a focus on regional integration of en-
in private homes and commercial buildings is remarkable. ergy markets and grids. Regarding energy security, he notes
Le Coq and Källmark claim that Sweden is not facing ener- that the fact that energy security risks differ among coun-
gy security problems, and that the Swedish energy market is tries complicates how the solidarity clause should be imple-
well connected to Nordic countries, and the Nordic electric- mented.
ity system is in turn connected to Estonia, Russia, the Neth- Taking on such a complex task, one needs to stay hum-
erlands and Poland. Looking towards the future, the authors ble. Providing clear and concise recommendations has prov-
see challenges in the possible phase out of Swedish nucle- en difficult. Over the course of the project, members of the
ar power in terms of back up capacity and transmission, and project team and workshop participants have received in-
the competitiveness of the Swedish industry if the price of puts from different angles, making them better equipped to
electricity increases. discuss these issues. Our hope is that this publication will
trigger important discussions in your networks. Together, we
In chapter five, Daniel Engström Stenson concludes the can create a Europe that combines improved energy securi-
preceding four chapters and the three workshops held dur- ty and competitiveness with reduced carbon emissions.
92 MEASURING EUROPEAN SECURITY OF ENERGY SUPPLY1 Chloé Le Coq and Elena Paltseva (Stockholm School of Economics-SITE) 1 This chapter is based on an ongoing research project on the security of energy supply. A few of the references used in the chapter, such as Le Coq and Paltseva (2009) and (2012), are among the project outcomes. We are grateful for the valuable comments and suggestions from Daniel Engström Stenson and one anonymous referee. All remaining mistakes are our own. 10
EUROPE’S ENERGY FUTURE – HOW TO COMBINE ENERGY SECURITY WITH REDUCED EMISSIONS
Introduction ty of energy. Given this focus, it is also common to distin-
guish between external energy security and internal energy
Energy security has been on the European political agenda security. External energy security is associated with import-
at least since the creation of the European Coal and Steel ed energy – energy delivered by suppliers outside the coun-
Community (ECSC) in July 1951. Concern over energy se- try. Internal energy security is related to the stability of the
curity has been recurrently raised during many past energy energy supply within the country. In this chapter, we discuss
crises, and remains highly topical now. The European Union mostly the external dimension of energy security, looking at
has just recently reassessed its willingness to form an Ener- the risks associated with energy supplied by producers out-
gy Union. In a document released on February 25, 2015, the side the country.
European Commission stressed that energy security is one The chapter is divided into three sections. The first sec-
of the five dimensions of the common energy policy (see Eu- tion discusses how a country/region’s energy security can
ropean Commission, 2015). be measured, given its energy profile. It presents some es-
The energy security concern arises from the three main timates of the European Union’s energy security. The sec-
energy challenges faced by any country or region – the ond section addresses possible extensions of the above ap-
“quantity”, the “quality” and the “source” challenges. The proach, using the EU-Russia gas relationship as a running
“quantity” challenge concerns the decision on the amount of example. The last section summarizes our findings and dis-
energy necessary for a nation’s well-being and sustained de- cusses future challenges faced by the European Union re-
velopment. The “quality” challenge concerns the choice of garding energy security.
the preferable composition of the energy mix. Тhe “source”
challenge concerns the decision on the proportion of its en-
ergy bundle to be produced domestically, the proportion to Energy portfolio
be imported, and the best way to organize energy trade with
foreign energy suppliers. The challenges are deeply inter-
and energy security in EU
twined among themselves and with other policy decisions Energy security is typically addressed in a comparative per-
and constraints. The way they are met determines many po- spective, either over time, or across different countries/re-
litical and economic outcomes, and, most importantly for the gions, or both. For example, one may assess the evolution
current chapter, a country’s (or a region’s) energy security. of energy security in response to certain policy measures,
Energy security is a multifaceted phenomenon, so it is or address the trade-off between energy security at a coun-
not surprising that the definitions of energy security vary. try level and international cooperation. This comparative per-
Nearly all of them, naturally, address the above-mentioned spective calls for the development of quantifiable indicators
challenges – that is, the energy demand and the ways to op- of energy security. In this section we illustrate how this task
timally meet this demand with a preferable mix and source of can be approached. We outline various aspects of exter-
energy. However, the emphasis on different dimensions and nal energy security, explain how they can be quantitatively
aspects of these challenges, as well as on certain additional measured, and provide estimates of the security of external
concerns, can vary noticeably across the definitions. Some energy supply for the EU member states.
of them prioritize security of supply and affordability of ener-
gy, others highlight availability, energy efficiency, trade, en- What matters for the external energy security?
vironmental quality, and/or social and political aspects (see, The above “quantity-quality-source” triad combined with our
e.g., Sovacool and Mukherjee (2011) for an overview). focus on external energy security suggest a number of key
In this article, we focus on the one, most universally dimensions that need to be considered when assessing en-
stressed aspect of energy security – continuous availabili- ergy security.
11MEASURING EUROPEAN SECURITY OF ENERGY SUPPLY
(i) The first is the dependency dimension that character- Figure 1:
izes the importance of imported fuels/external energy sys- Share of non-EU imports in total energy consumption, by fuel.2
tems for the economy in question. This is, perhaps, the most
100%
commonly used energy security indicator, frequently appear- 90%
share oil share gas share coal
ing both in political and in media debate. 80%
There are different ways of measuring the dependency. 70%
The most straightforward one is simply to evaluate the “to- 60%
50%
tal” energy import dependence, i.e. the share of energy im-
40%
ports in a country’s primary fuel consumption. However, this 30%
measure may often not be informative enough, and, in par- 20%
ticular, not well suited to reflecting the country’s approach 10%
to the “quality” challenge of choosing an appropriate ener- 0%
Austria
Belgium
Bulgaria
Croatia
Czech Republic
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Ireland
Italy
Latvia
Lithuania
Netherlands
Poland
Portugal
Romania
Slovakia
Slovenia
Spain
Sweden
UK
gy mix. A common solution is to narrow down the dependen-
cy by considering a specific fuel and analysing the country’s
energy portfolio to get a better overview of the exposure to Source: Eurostat, 2013
external energy security risks. Specifically, dependency in
this case would be measured on a by-fuel basis, e.g. by the
share of imports of each fuel in a country’s consumption of port bundle. Indeed, different fuels have different emission
the considered fuel and/or contribution of this fuel to the to- content and overall environmental impact. Thus, the supply
tal primary fuel consumption of this country. security concerns should be carefully weighed against the
Figure 1 presents an example of this latter dependen- green objectives of the energy policy of the country (again,
cy measure for the EU member states. It depicts a share of we return to this discussion later in section 2).
non-EU import of a fuel in the total country’s energy con- This figure also suggests that oil seems to be the most
sumption for three fuels (oil, gas, coal). For example, in the critical fuel for EU energy security, substantially more so
case of Spain, the red bar indicates that 44% of Spain’s total than gas and coal. The last point does not seem to be in line
energy consumption corresponds to oil imported from non- with the public, political and academic discussion of the cur-
EU suppliers, the blue bar shows that 24% of total energy rent EU energy security issues, where gas is perceived to be
consumption corresponds to non-EU gas imports, and the at least as problematic as oil, if not more so. This might re-
green one that 7% of consumption comes from non-EU coal. flect the limitations of the (total or by fuel) import dependen-
There are a few observations to infer from this figure. cy indicators, which do not take into account supply vulner-
First, for most EU member states the import ratio varies abilities arising from the composition of the import portfolio
greatly across fuels. This illustrates the above point that the or from uncertainty associated with external energy supply.
“total” energy import dependency measures, such as an ag- This brings us to the next key energy security aspect:
gregate share of imported fuels in energy consumption, are
likely to be too imprecise in reflecting energy security con-
cerns. Second, there is also a substantial variation of the in- 2
For a few EU member states the net imports from non-EU sources exceed
their domestic consumption for a given fuel due to re-exports (such as, e.g.,
dicators across countries, which may impose certain con- in case of oil in Lithuania or the Netherlands). Ideally, to measure the security
straints on the formation of the EU Energy Union (we return of the energy supply we would need to account for the geographic origins of
to this point later). Third, the variation of import dependency the fuel for domestic consumption vs. re-exports. However, Eurostat data do not
allow for this distinction. So in Figure 1 we assume that whenever the net non-
both between fuels and across EU member states also high- EU imports of a country exceed its domestic consumption of a fuel, the entire
lights the environmental aspects of choosing an energy im- domestic consumption comes from non-EU sources.
12EUROPE’S ENERGY FUTURE – HOW TO COMBINE ENERGY SECURITY WITH REDUCED EMISSIONS
(ii) The availability dimension. The energy security of a sociated with a supplying country and the distance between
country is crucially dependent on the existence of alterna- consuming and supplying country as a proxy for the tran-
tives to compensate for a sudden energy supply disruption. sit-associated risks. The REES index is calculated for a spe-
For example, if all imports of a country originate from the cific fuel and a specific country/region.3
same supplier, and there is not much of a supply alternative The above REES index components are combined in such
available in the market, a supply disruption may be far more a way that higher values of REES correspond to higher risks
costly than if the import portfolio is well diversified across of a supply disruption for a country. For example, an in-
the suppliers, or when the market for respective fuel is read- crease in the fuel imports or political risks of the supplying
ily available. country will increase REES. On the other hand, an increase
(iii) Relatedly, the uncertainty dimension is characterized in energy import diversification will lower REES.
by different external (strategic or random) factors that in- Figure 2 illustrates the REES index estimates for 2013 for
crease the risk of energy/fuel supply disruption, such as po- each EU member state, for three types of fuels – oil, gas and
litical risks related to the supplier, risks of tensions in the coal – based on Eurostat data on these fuels’ imports, ex-
supplier-consumer relations and political or technical risks ports and consumption, a political risk rating produced by the
regarding transit. These factors may be general or supplier- PRS group, and our own proxies for energy transportation
or fuel-specific, and measuring them may often represent a risks, etc. (see Le Coq and Paltseva (2009) for the details).
considerable challenge. Similarly to Figure 1, it clearly shows that the exposure
to energy risks is not the same for different member states
A measure of energy security and is also different across energy types. However, unlike
the dependency ratio in Figure 1, the REES index singles out
This subsection provides an example of an external ener- natural gas as the riskiest fuel for the EU’s external energy
gy security indicator incorporating the above components to security, with oil being somewhat less risky (and coal being
measure energy security in the EU. We follow the index ap- significantly less risky). The reason for this difference is at
proach developed by Le Coq and Paltseva (2009). The in- least twofold: first, the majority of natural gas consumed in
dex, named Risky External Energy Supply (REES), is con- the EU is supplied via pipeline, making gas not very easy to
structed to measure the short-term impact of external energy substitute in the case of a supply disruption. Liquefied nat-
supply disruption. ural gas (LNG), which can be more easily substituted in the
In line with the discussion above, the REES index com- market, is consumed very little, or not at all, by some mem-
bines the three main aspects of energy security (the exact ber states. No less importantly, many EU member states
formulae can be found in Le Coq and Paltseva (2009, p. have highly concentrated gas imports (e.g. in central and
4476)). First, it includes the import dependency ratio. Sec- eastern Europe, as well as in some of the western European
ond, it accounts for the diversification of the fuel supply for countries, such as Austria, most natural gas originates from
a specific country by measuring the concentration of sup- Russia). This again contributes to the risks associated with
pliers in the imports of each fuel. This element captures the the security of gas supplies. Both these components raise
options available to a country in the case when one of the
energy suppliers fails to deliver. The index also accounts for 3
In this chapter we choose to limit our analysis to fossil fuels, such as oil,
the fuel’s fungibility (which measures how easy it is to switch gas and coal. In fact, the fuel with the highest import dependency in the EU is
between suppliers of this fuel – for example, the fungibility of uranium – an EC Memo (2014) states that in 2012 the EU imported 88% of its
a pipeline gas would be lower than that of liquefied natural consumption of crude oil, 66% of natural gas, 42% of solid fuels and 95% of
uranium. However, EU uranium import is, as of today, well diversified and a sig-
gas). Finally, it quantifies the uncertainty aspect of an energy nificant share of it comes from “safe” producers such as Australia and Canada,
transaction, by including indicators of the political risks as- making the risks of uranium supply relatively limited.
13MEASURING EUROPEAN SECURITY OF ENERGY SUPPLY
Figure 2:
REES index by fuel, 2013. with Eurostat data from 2013 and the PRS group.4
Source: Authors own calculations,
Naturally, member states with high country-level energy
50.0
based on Eurostat and PRS Group data supply risks (such as Greece for oil, Hungary for gas or Por-
REES oil REES gas REES coal tugal for coal) are found to contribute significantly to the EU-
40.0 wide external energy risk exposure. However, country size is
no less important for EU energy risks. Indeed, another group
30.0
of large contributors to CERE are large member states with
20.0 high aggregate energy consumption but intermediate coun-
try-level risks (like Spain or Germany for oil, Italy for gas and
10.0
oil, and the UK for coal).
0.0
Beyond energy portfolio/
Austria
Belgium
Bulgaria
Croatia
Czech Republic
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Ireland
Italy
Latvia
Lithuania
Netherlands
Poland
Portugal
Romania
Slovakia
Slovenia
Spain
Sweden
UK
consumption and energy security
the REES for gas, as compared to, e.g., oil, where neither of So far we have discussed the measures of the EU’s external
the above is true to the same extent. energy security based on the energy portfolio of the mem-
Notice that the absolute value of the REES index would ber states. However, there are many other aspects that mat-
not necessarily have a direct interpretation. Naturally, any
energy security index combining different variables would
Figure 3:
be sensitive to the weights of each variable. However, the CERE index Belgium
benefit of REES (and other similar indexes) is that it gives for oil, 2013. 8%
a quantitative assessment to energy security problems, and
provides a reference point for international and over-time Germany
9%
comparisons.
So far we have focused on the EU member state level. Others
(with CEREEUROPE’S ENERGY FUTURE – HOW TO COMBINE ENERGY SECURITY WITH REDUCED EMISSIONS
Figure 4: ter for energy security, such as the energy routes used by
CERE index for gas, 2013. the member states, the bargaining power possessed by the
energy consumers vs. suppliers, and the characteristics of
Austria domestic energy markets. While quantification of these as-
6% pects to include them in energy security measure(s) is often
Czech
Others Republic difficult (and, at times, prohibitively so) due to non-availabili-
(with CEREMEASURING EUROPEAN SECURITY OF ENERGY SUPPLY
quantitative assessment of the risk associated with exter- sification and economic dependency on energy export profits.
nal gas pipeline supply by constructing a Transit Risk In- Once again, the EU-Russia gas relationship offers a good
dex (TRI). The TRI accounts for (i) diversification of transit illustration of this point. European energy security is often
routes from a given supplier; (ii) the risk of a physical rup- discussed by stressing the extent of the EU dependency on
ture of a pipeline; (iii) political instability in the countries on Russian gas and the risks associated with this dependency.
the transit path, and (iv) the bargaining power for each tran- This is, of course, a valid point, because 27% of the EU’s
sit route, i.e. the political influence that the countries served gas import export comes from Russia (Eurogas, 2014), and
by the same pipeline may exert on the gas supplier to pre- for several EU member states this share has exceeded 90%
vent or minimize the supply disruption for political purposes. (Eurostat, 2014). However, Russia is no less dependent on
This methodology is then applied to evaluate the EU the EU. First, the EU accounts for 60% of Gazprom’s reve-
member states’ exposure to risks associated with Russian nue from gas sales (FT, March 2015), which in turn impacts
gas supply. It shows a clear asymmetry in current transit risk on the Russian budget revenue. Moreover, Gazprom is cur-
exposure among the EU member states purchasing Russian rently under antitrust investigation regarding its selling prac-
gas. This unsurprising finding reflects the variation across tices within the EU (see FT, April 2015), which creates some
the member states in terms of gas dependency, the number additional uncertainty for this supplier.
of available gas transit routes, the political influence associ- In other words, security of gas trade is a concern for both
ated with each route, etc. parties. The EU is concerned with its security of gas supply
Such an index can be used to analyse the change in en- and in particular would like to avoid Russian gas supply dis-
ergy security associated with potential access to a new en- ruption. Russia is concerned about the security of gas de-
ergy route. For example, in Le Coq and Paltseva (2012) we mand and would like to secure a stable gas market share in
have studied the effect of Nord Stream on the energy secu- the EU despite the geopolitical tensions. Clearly, these two
rity of EU member states using the TRI index. We show that objectives are closely interrelated and represent the core
for the member states immediately served by Nord Stream of the mutual gas dependency between Russia and the EU.
(“NS countries”), Nord Stream allows a better gas route di- Le Coq and Paltseva (2013) have proposed a unified
versification and therefore lowers transit risk exposure. How- framework to characterize and quantify mutual gas depend-
ever, the transit risk exposure is increased for the member ency between the EU and Russia. We have constructed an
states that are not themselves connected to Nord Stream but index for each gas trading party, the Supply Dependency In-
share another, “older” energy route with the NS countries. dex (SDI) for the EU and the Demand Dependency Index
The reason is that NS countries are now less willing to ex- (DDI) for Russia. These indexes can be used to evaluate fu-
ercise their bargaining power along the “older” gas routes, ture gas market developments (such as a new pipeline or im-
thereby reducing the political influence that countries served proved access to LNG) from the dependency angle.
by the same pipeline may exert on the gas supplier.
Developing the internal market
Energy security on both sides of the market So far we have not mentioned the role that the internal mar-
Another important aspect overlooked in the typical approach- ket is (and could be) playing in the improvement of the EU’s
es to measuring energy security is the interrelation between energy security. A well-functioning internal energy market
a buyer and a seller. Energy security is typically evaluat- could affect the external energy supply security of the EU
ed from the buyer’s perspective, thereby stressing the size through a number of economic and technological mecha-
of import dependency on toward a specific energy supplier. nisms. For example, increased competitiveness in the inter-
However, energy security may be no less of a concern for nal market would enable reaction to energy shortages via
the energy supplier, for example due to a lack of demand diver- the market mechanisms rather than governmental/intergov-
16EUROPE’S ENERGY FUTURE – HOW TO COMBINE ENERGY SECURITY WITH REDUCED EMISSIONS
ernmental “from-the-top” decisions, which require significant Figure 6:
effort in terms of design and implementation. The availability EU energy consumption 1990–2013, by fuel, MlnTOE.
of reverse flow technology for natural gas can enable the de- Petroleum products
livery of gas from other regions, or other EU member states, 600
in the case of sudden halts of supply or technical failures.
The development of internal storage combined with market Solid fuels
Gas
interconnection between the EU member states may also fa- 400
cilitate coping with sudden energy crises. Nuclear energy
While incorporating the storage capacities into the ener- 200
gy security index may be relatively straightforward, the oth- Renewable energies
er above-mentioned components are more difficult to quanti- Source: Eurostat
fy. A sophisticated computational model of pipeline networks 0
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
and/or local market structure would be needed to account
for market interconnections between different EU member
states. While this approach is feasible, it is computationally sumption of gas replacing coal and oil has thus had positive
very involved and is typically not used in indexes measuring environmental effects within the EU, while at the same time
energy security risks. exacerbating the energy security concerns.
Additionally, the EU’s internal energy markets have im- One potential way to control for this trade-off in an en-
proved in recent years, but more work and more investment ergy security measure would be to account for the pollu-
are still needed for the internal market to be a buffer against tion resulting from imported and domestically produced en-
external energy risks. ergy. This, however, would require a substantial amount of
data on energy flows and their CO2 and other pollution con-
Environmental aspects of energy security tent, energy transformation, efficiency of energy use, quality
Growing concern about climate change has put pressure on of abatement technologies available in the country in ques-
the EU to move to low-carbon sources. The above discus- tion, etc. Just as above, due to computational difficulties,
sion has highlighted that there is a trade-off between envi- this approach has limited use in indexes measuring energy
ronmental concerns and energy security. Remember that our security risks. One example of such an index is the Ener-
index has identified natural gas as the most risky among the gy Trilemma Index of the World Energy Council, which incor-
three fuels that we have considered above as concerns for porates both energy security and environmental sustaina-
the security of energy supply. At the same time, out of these bility components. However, its construction is complicated
three fossil fuels, natural gas is associated with the lowest and not entirely transparent, and the approach it takes to
carbon emissions: the Energy Information Administration es- the security of energy supply falls short of accounting for
timated the CO2 emissions of coal to be 95 kg/MlnBTU, the the above-mentioned important aspects of energy security,
CO2 emissions of gasoline and other transportation fuels to such as portfolio diversification and different energy types.
be around 70 kg/MlnBTU, and that of natural gas to be 53 Böhringer and Keller (2011) combine a supply security index
kg/MlnBTU, almost twice as little as for coal.5 approach with a sophisticated CGE-based model to assess
Figure 6 summarizes the evolution of the EU energy con- the impact of climate policies on the security of energy sup-
sumption over the last couple of decades. As can be seen ply (see their paper for a discussion of associated concep-
from Figure 6, the use of natural gas has been increasing tual and data difficulties, and approach limitations).
(and then stabilizing), while the use of petroleum products,
and especially coal, has been declining. The increased con- 5
See http://www.eia.gov/environment/emissions/co2_vol_mass.cfm.
17MEASURING EUROPEAN SECURITY OF ENERGY SUPPLY
Domestic energy security disruption for a specific member state. Our second measure,
Finally, we would like to mention a topic we have overlooked Contribution to EU Risk Exposure (CERE), evaluates the rel-
so far – domestic energy security. Indeed, the energy de- ative contribution of the member states to the EU-wide risks.
pendency argument above clearly suggests that reliance on There are at least two lessons to learn from these index-
domestic sources of energy increases a country’s self-suf- es. The first group of lessons concerns methodological as-
ficiency and lowers external energy supply risks. However, pects of measuring the security of energy supply. We have
this does not imply that domestic energy supply bears no discussed and illustrated in our exercise the fact that energy
risks. Indeed, domestic transportation of energy may equally security is a complex phenomenon, and simplistic indicators
be prone to technological failures, leading to power outages, addressing only single aspects of energy security are like-
oil spills and other kinds of energy delivery interruptions. An- ly to be a poor measure of it. Indicators combining different
other energy security issue that is typically dealt with domes- variables may be more preferable. At the same time, more
tically is the ability to effectively cope with demand peaks. involved indicators may require access to large amounts of
The balance between the industrial, transport and residential specific data, which is often not available. Another point is
energy use, the adequacy of energy conversion and distribu- that composite indexes are sensitive to the component ag-
tion and the availability of fuel storage also contribute to do- gregation procedure. This makes them more relevant as a
mestic energy security. policy/research tool for cross-country and over-time com-
Many of these factors can be approximated by meas- parisons, and perhaps less relevant for one-point-in-time risk
urable observables – for example, the reserve margin of assessment. Further, both REES and CERE for the EU mem-
generation capacity can be used as a proxy for demand ber states vary greatly across fuels. Thus, an aggregate in-
peak management ability, and the ratio of domestic ener- dex that estimates a risk of all kinds of energy supply disrup-
gy production to consumption is used as a proxy for ener- tion would be inadequate for capturing short-term external
gy self-sufficiency. Some of these measures are indeed in- energy risks, when substitutability between fuels is highly
corporated into the energy security indicators offered by the limited. While better justified in the longer run, such aggre-
literature (see, e.g., the Supply-Demand Index of De Jong gations across fuels should still be taken with caution.
et al. (2007)). Nevertheless, the main focus in the energy The other group of lessons has more political relevance,
security literature has been on external security – perhaps especially in view of the recently proposed and actively de-
because domestic governments would normally have better bated European Energy Union. Figures 1–5 demonstrate that
control over domestic energy security factors than over ex- external energy risks for the EU member states are very dif-
ternal supply risk determinants. ferent between states. This suggests that member states are
likely to have different foci and widely varying “hot spots”
when it comes to external energy security issues. This may
Conclusion be one of the explanations for the delays in implementation
of long-discussed common energy policy in the EU, which
What did we learn with the index exercise? has been on the active political agenda for at least 15 years.
In this chapter, we have discussed an approach measuring Indeed, the diversity of energy risks across the EU suggests
the risk of energy supply disruption in the EU. We have fo- that “one size fits all” solutions are not likely to have suffi-
cused on the “external” dimension of energy security, quan- cient support across the member states, while country-spe-
tifying the risks associated with energy supplied by pro- cific energy policies may be difficult to justify as an EU-wide
ducers from outside the EU. Our first measure, the Risky energy policy. However, recent developments in the EU’s in-
External Energy Supply (REES) index, allows us to put a ternal energy markets (such as more competition or inter-
number on the risks of, and damage from, a potential supply connection between the individual markets) allow for more
18EUROPE’S ENERGY FUTURE – HOW TO COMBINE ENERGY SECURITY WITH REDUCED EMISSIONS
flexible, market-based compensation mechanisms across side. Indeed, the current prices of LNG in South-East Asia
different EU member states, thereby facilitating the devel- exceed the European prices, so there are no guarantees that
opment and implementation of common energy policy rules. US shale gas, if available for exports, will flow into the EU. At
These considerations are likely to be relevant for the design the same time, Russia, foreseeing the future market develop-
of the mechanisms behind the European Energy Union. ments, is likely to be searching for new consumers already
now. Indeed, China has already started to compete with the
EU’s next challenges in terms of energy security EU for Russian gas with the decision to build a new pipe-
The total net imports of natural gas, solid fuels and oil rep- line between Russia and China. In other words, there are no
resent more than half (53% in 2013, Eurostat) of the share guarantees that the shale gas revolution will improve the ex-
of primary energy consumption in the EU. Moreover, the ternal energy security in the EU in the short-to-medium run,
EU’s demand for energy is predicted to increase substantial- and this needs to be accounted for in political decisions.
ly. As a result, Europe will increase its energy imports from Another important challenge the EU is about to face is
non-European suppliers, implying that energy security con- the interrelation between the environmental targets and en-
cern is not likely to fade in the coming decade. ergy security. The concerns about climate change and envi-
At the same time, evolution of the internal and external ronmental damage have been growing substantially over re-
energy markets may radically shift the main focus of the en- cent decades, and the EU has been determined to move to
ergy security concern. We have already addressed the inter- lower-carbon traditional fuels, such as gas, as well as green
nal markets perspective earlier in the chapter. Another good energy sources, such as wind and solar. The increased use
example here is ongoing change in the liquidity of the ener- of gas, primarily replacing coal, has indeed had a positive
gy markets, associated first with LNG, and currently with the environmental benefit within the EU (for example via reduced
shale gas revolution. Indeed, before the LNG technology be- greenhouse and air pollutant emissions). However, it has al-
came commercially available, natural gas markets were very so increased the risks associated with the security of ener-
geographically segmented, and were often characterized by gy supply. Similarly, the use of wind energy in the absence
the significant market power of the producers and resulting of a backup technology may result in power outages (and
low fungibility of natural gas. LNG transportation was the energy security risks) due to the instability of wind energy
first step toward interconnecting different international mar- production. In turn, backup technologies are often coal- and
kets. However, the gas market dynamics have completely gas-based, with the former being carbon-intense, and the
changed with the new extraction techniques (mostly hydrau- latter potentially prone to security risks. No less important is
lic fracturing, or fracking) on top of the possibilities of trans- the composition of the renewable energy portfolio. Indeed,
porting liquefied gas. First, countries who are used to being while renewables have very low external supply risks, simply
net gas importers have the potential to become gas export- because they have very low import share, domestic supply
ers (see BP statistical book, 2014). Combined with the LNG disruption risks are likely to vary across different renewable
transportation possibilities, this change is likely to transform energy types, and different operation networks. For exam-
the regional gas markets into more globalized markets. This ple, wind and solar energy are more intermittent than, say,
means that the gas market will become more liquid, the num- geothermal energy; large-scale grids are more vulnerable to
ber of available gas suppliers for Europe will increase, and disruption than the networked microgrids. All of the above
large gas producers like Russia are likely to lose bargaining suggests that the EU needs to carefully assess the inter-
power. In this sense, the shale gas revolution may increase connection between environmental goals and energy secu-
EU’s energy security in the long run. rity risks and put more effort into developing environmental-
However, if the gas market becomes more liquid, it is also ly friendly energy technologies that are not at the same time
likely that the EU will face some competition on the demand associated with higher energy security risks.
193 THE AUSTRIAN ENERGY POLICY FROM A EUROPEAN PERSPECTIVE Ronald Pohoryles 20
EUROPE’S ENERGY FUTURE – HOW TO COMBINE ENERGY SECURITY WITH REDUCED EMISSIONS
Introduction Austria’s energy profile
From a European perspective, the opposition against nuclear The policy framework
energy is one of the defining issues of Austrian energy policy. The energy strategy of Austria presented in 2010 rests on
Austria was the first European country to reject the pro- three pillars (Federal Ministry of Economy, Family and Youth,
duction of nuclear power, in the 1978 referendum, and has 2010a):
historically favoured renewables. This is, at least in part, due
to the availability of hydrodynamic power, and recently wind • security of supply;
energy. The major arguments against the production of nu- • energy efficiency; and
clear power were safety, but security as well: the nuclear fu- • renewable energy resources.
el rods have to be imported, and the final storage was un- It states that the goal of Austria’s energy policy is to en-
clear. This was followed by a legislative action in the Austrian sure security of supply, environmental compatibility, cost-ef-
Parliament that led to a constitutional law in 1979 that bans fectiveness, social compatibility and competitiveness with-
the production of nuclear energy in Austria. In 1990, the Aus- in the framework of the European targets (Federal Ministry
trian government announced a plan to create a “nuclear-free of Economy, Family and Youth, 2010a). If implemented, the
zone” in central and eastern Europe. In turn, it offered sup- share of renewable energy consumption of the total final en-
port to its neighbouring countries to support the increase of ergy consumption is thought to increase from 24.4% (2005)
energy efficiency and the production of renewables (Lofst- to 35.5%.
ed, 2008). In addition, the most important laws for Austrian ener-
Since Austria’s accession to the EU in 1995 it has used its gy policy are the Energy Efficiency Act (Energieeffizienzge-
EU membership to underline its opposition to the construc- setz 2014 (Energy Efficiency Act), 2014), provisions for the
tion and modernization of nuclear power stations in neigh- implementation (Energieeffizienzpaket 2014 (Energy Effi-
bouring countries. For example, Austria threatened to block ciency Package 2014), 2015) and the Green Electricity Act
the Accession process of the Eastern European candidate (Ökostromgesetz 2012, 2012).1
countries because of their energy policy. Austria was, at • The Energy Efficiency Act: The Act is the transposition
least in part, successful: the plan to enlarge the Czech nu- of the Energy Efficiency Directive 2012/27/EU of the
clear plant Temelín was stopped in 2006. Furthermore, Aus- European Commission (European Commission, 2012).
tria blocked a credit from the EBRD to finance the moderni- The consumption reduction requirements particularly
zation and/or building of nuclear power stations. And indeed, apply to energy providers, large companies and gov-
Austria has sued the European Commission at the Europe- ernment agencies. One of the requirements of the di-
an Court of Justice for its decision to support financially the rective is the delivery of an Annual Progress Report on
construction of the British nuclear power station on the site Energy Efficiency (Federal Ministry for Economic Af-
of Hinkley Point C (Wiener Zeitung, 2015). If successful, fairs, the Family and Youth, 2013).
EDF, which intends to construct and run the nuclear power • The Green Electricity Act is the transposition of three
station, would most likely withdraw from the plan. European directives on the promotion of the use of en-
ergy from renewable sources and on the internal mar-
ket (European Commission, 2009). It includes regula-
1
It should be noted here that the energy policy is a contested issue. For tions for certifying the origin of, and the production from,
instance, in Austria there is a strong influence from the Chamber of Economy, renewable sources, preconditions for, and the regime of,
the public interest organization of Austrian entrepreneurs (Bärenthaler, Guhsl,
and Kaiser, 2012). With respect to the Energy Efficiency Act, some of the opposition,
support for electricity generation from renewable energy,
including the Austrian liberals, opposed the Act for several reasons (Pock, 2014a). and the financing mechanism for the expenses incurred.
21You can also read
