Energy security should be the priority

Recent trends are indicating the ever growing need for recognising the energy sector as one of the important aspects for an economy- big or small. The International Energy Agency (IEA) opines that global energy demand growth increased last year by 2.1 per cent from 2016. Renewable forms of fuel, meanwhile, met about 25 per cent of global energy demand growth. For electricity-generation, renewable increased by 6.3 per cent from 2016, the fastest rate for any type of fuel.

Keeping these in view let us examine the scenario.

THE GLOBAL VIEW: It is a well-known fact that previously energy security was mainly associated with oil supply. But while oil remains a key issue, the increasing complexity of energy systems calls for a systematic and rigorous understanding of a wider range of vulnerabilities in as much as disruptions can affect other fuel sources, infrastructure or end-use sectors. Thus, analysis of oil supply security alone is no longer sufficient for understanding a country's energy security situation as a whole.

The IEA nicely defined energy security as "the uninterrupted availability of energy sources at an affordable price". Energy security has many dimensions: while long-term energy security mainly deals with timely investments to supply energy in line with economic developments and sustainable environmental needs, short-term energy security focuses on the ability of the energy system to react promptly to sudden changes within the supply-demand balance. Lack of energy security is thus linked to the negative economic and social impacts of either physical unavailability of energy, or prices that are not competitive or are overly volatile.

Actually, if we look at the global picture we can definitely locate that no country is 'energy independent'. Even Saudi Arabia - the world's largest oil exporter - imports refined petroleum products like gasoline. Gasoline is imported by UAE. The regions with abundant raw resources also rely on import of some form of energy.

GOOD STEPS RAISES HOPES: Many countries struggle to upgrade their energy systems to fully support current and future requirements of energy security and access, sustainability and economic growth, while looking for ways to create a more effective transition towards new energy architecture.

The French government has just launched a plan to renovate some 500,000 homes every year to make them energy-efficient, and cut down on heat loss, power consumption and carbon emissions. The government will disburse 200 million euros (US $244 million) that will help accelerate the plan by training professionals on new energy efficiency standards and providing aid to families who need to do home renovations.

The French government also plans to set aside some 4.8 billion euros to renovate public-sector buildings, including schools and hospitals, to make them energy-efficient.

The real estate sector in France accounts for 45 per cent of energy consumption and 27 per cent of greenhouse gas emissions. Some seven million homes are not adequately insulated.

The Netherlands' recent unearthing of fresh natural gas reserves can help their economic growth over time. It is pertinent to mention here that the Dutch energy industry is responsible for a good six per cent of the economy's GDP or 36 billion Euros per year as it employs 100,000 people annually. The Netherlands is among the largest importers and exporters of oil and oil products in the world, and has a developed gas industry. A gradual transition to green energy is enabling Dutch energy companies and institutions to become a top sector contributing to the economy.

In fact, also in Myanmar, USA, Canada and Cambodia, globally and nationally, the "architecture of energy systems" is undergoing significant changes. Governments, industries and other stakeholders are seeking new solutions to ensure energy systems underpin 21st century requirements of economic growth, sustainability and energy security.

China accounted for about 80 per cent of the growth in natural gas consumption, as its economy shifts towards cleaner-burning fuels. The rest of Asia contributed to a one per cent gain in coal demand. In the USA, coal production is set to reduce by five per cent this year, but increase by one per cent next year. ENSURING ENERGY SECURITY: DIFFICULT TIMES AHEAD: It is better to accept that fossil fuels are necessary even as major economies shift toward cleaner options. Still, the long-term future for coal shows clear and significant declines in usage. The IEA said coal consumption declined by about 2 per cent from 2016 and by 4.2 per cent over the last two years or so. While its use is in the midst of a decade-long period of decline, demand by 2022 will be about the same as the current five-year average.

There is no certain long-term future for coal as a power source given the shift toward lower carbon options. But that is not the case in near-term as coal accounts for about 30 per cent of total energy used globally and about 40 per cent of total electricity generation. Among fossil fuels, natural gas is a cleaner option when compared to oil or coal.

There are some threats against energy security including political turmoil in rich oil producing countries, the rise of new economic giants (China, India, South Korea, among others, that present heavy competition over energy sources), natural disasters and accidents etc. Also, energy security does not refer just to the amount of energy resources that are at disposal to a certain country but also to a security of energy supply (adequate distribution network).

 A GLOBAL CHALLENGE: Thus, stable and reasonable energy prices are needed to reignite, sustain and expand economic growth - as rightly opined by the World Economic Forum.

The IEA is responding to this challenge by developing a comprehensive tool to measure energy security. The IEA Model of Short-term Energy Security (MOSES) examines both risks and resilience factors [resilience factors include the number of entry points for a country (e.g. ports and pipelines), the level of stocks and the diversity of suppliers] associated with short-term physical disruptions of energy supply that can last for days or weeks. MOSES extends beyond oil to monitor and analyse several important energy sources, as well as the non-energy components (such as infrastructure) that comprise of an energy system. Analysis of vulnerability for fossil fuel disruptions, for example, is based on risk factors such as net-import dependence and political stability of suppliers.

It has been the fact that for many years governments have struggled to provide energy security through a mix of policies that tempered demand and increased supply. But there is a growing evidence that these policies are falling far short of the efforts needed. What is more, energy exporters and importers are interdependent and increasingly anxious about the reliability of energy supplies. Additionally, a number of interlinked issues and challenges have appeared in recent years.

Obviously, renewable energy should be the vital part of such a plan, but at the moment it is still relatively expensive even in big economies like the Netherlands. The governments have to, therefore, pursue an innovation policy to drive down cost of renewable energy and encourage large-scale application of renewable in the long term. The transition to a low carbon economy depends largely on increases in the efficiency of energy use - in buildings, transport, and industry - and on the efficiency of energy generation.

Governments have to opt for a balanced, best value-for-money mix of green and grey energy from domestic and foreign sources. Risk-managed (Chernobyl, Fukushima!) nuclear energy is, no doubt, a necessary part of the mix in as much as nuclear energy also reduces dependence on other (fossil) fuel sources, and does not cause CO2 emissions. Even so far as bio-fuels are concerned, all is not well.

Side by side, a recent report by the EEA found that benefits vary significantly depending on the source of crops. The current mix of crops used for energy is "not favourable to the environment", accordingly.

For this reason, there is no doubt that efforts must be made to promote the use of solar, wind and tidal energy, biomass and other renewable energy sources, especially keeping in mind the fact that the demand for petroleum products in the country has been growing at a rate of around 3 per cent per annum. A comprehensive policy duly covering all of the vital areas such as tapping nuclear energy, minimisation of transmission loss, and emphasis on renewable energy sources, can help us inch forward towards self-reliance in energy sector. Close technical cooperation with the neighbouring economies is emerging as a crucial thing, which, in turn, will benefit all the parties concerned.

GLOBAL COOPERATION A MUST FOR SURVIVAL: It is crystal clear that in the absence of global cooperation, progress cannot be expected. Russia, China, Brazil, countries around the Arabian Gulf and the Caspian Sea and the USA-Canada (more so after their strong emergence in the LNG market) are big players in the global energy market. Intensification of energy relations is a must. Active energy cooperation can improve the security of supply while at the same time bolster international trade.

Thus, this refers to availability of natural resources for energy consumption during a given period of time (short or long-term period in order to estimate future energy security). At this juncture each country must think about its future energy security because this is one of the main prerequisites for future economic growth. Our economy is traditionally based on fossil fuels (oil, coal and natural gas), and this fact leads us to the conclusion that only adequate supply of fossil fuels can guarantee future energy security. However, there are now severe limitations. That is why, the role of renewable energy at improving energy security is receiving attention because more renewable energy coming from domestic renewable energy sources means less need for fossil fuels and expensive foreign fuel import. Going for more domestic energy resources instead of relying on expensive foreign fuel import is very positive thing for future energy security.

Energy independence and energy security are two closely connected terms. Basically, in most cases improved energy security also means improved energy independence.

Full-fledged cooperation is thus a must among the major energy consuming nations in the arena of development and exploiting energy resources, especially in energy conservation, improvement of energy efficiency, development of alternative energy resources as well as environmental protection concerning energy utilisation and finally contribution towards maintaining the stability and security of international energy supply.

Dr B K Mukhopadhay is a Management Economist and Principal, Department of Management, ICFAI UNIVERITY, Tripura, India. [email protected]