3 DECC's approach to energy security
Definition of energy security
9. Over the course of our inquiry, it became clear
that there was no agreed definition of "energy security".
It can be used to describe the reliability of supplies, the resilience
of the supply infrastructure to attack or natural disaster, the
supply of affordable fuels, and the extent of national self-sufficiency.
It is also used to refer more generally to the absence of interruptions
to supplies of electricity, gas and petroleum products to end
users.[13]
10. Despite having a departmental priority to "deliver
secure energy on the way to a low carbon energy future",[14]
DECC does not appear to have a categorical definition of
what "secure energy" is. When asked to provide such
a definition, the Minister told us that "It is a combination
of matters. It includes the resilience of our energy supplies,
inevitably now it includes low carbon issues and it includes an
affordability aspect".[15]
11. Our own suggestion is as follows: a secure
energy system is one that is able to meet the needs of people
and organisations for energy services such as heating, lighting,
powering appliances and transportation, in a reliable and affordable
way both now and in the future. We recommend that the Government
adopts this definition.
Threats to energy security
12. Witnesses identified a large number of potential
threats to energy security in the UK. These ranged from generalised
concernsincluding the growing global demand for energy,
and the risk that upgrades to electricity infrastructure might
not keep pace with increasing demandto more specific risks
such as the 2011 "Arab Spring" resulting in a setback
in oil and gas investment in Libya, Yemen and Syria, and the impact
of a failure in the Langeled pipeline[16]
on UK gas supplies.[17]
(A complete list of all of the threats suggested to us during
our inquiry is included in Annex 1 of this report).
13. While a range of potential threats were identified,
an agreed set of headline risks did not emerge. Many witnesses
found it hard to answer the straightforward question "what
are the biggest risks to UK energy security?". Any robust
energy security strategy needs to consider the system as a whole;
a focus on a small number of specific areas is not sufficient.
14. One approach is to consider the resilience of
the system as a whole.[18]
This might involve ensuring that there is sufficient spare
transmission capacity to cope with the loss of a major power line,
or sufficient diversity in the sources and transportation routes
of imported fuels to cope with interruptions to any one source
or route. A resilience approach would acknowledge how difficult
it is to identify and analyse all threats. As Dr Strachan, of
University College London, pointed out, there are some threats
that fall into the category of "sheer ignorance", which
are simply impossible to quantify or predict (for example, a terrorist
attack on energy infrastructure).[19]
Focusing on resilience is a way of dealing with these kinds
of "unknowable" threats.
15. As well as surviving short-term shocks (for example,
spikes in fossil fuel prices, terrorist activity and accidental
damage), the system needs to be resilient to longer-term changes
such as the decline in global reserves of conventional oil or
the need to decarbonise the energy system.[20]
16. Focusing on resilience requires a more holistic
approach to energy security. The Institute of Engineering and
Technology (IET) argued for a "systems approach" to
energy security, which acknowledged the linkages between different
parts of the energy system as well as the risks associated with
individual components of the system.[21]
The IET noted that "energy security is a complex and
multidimensional problem and solutions with a positive impact
in some areas can have negative effects in others".[22]
For example, electrification of transport might reduce dependence
on imported oil but would increase dependence on electricity infrastructure.[23]
17. Understanding how changes in one part of the
energy system will impact on others is an essential part of producing
a resilient energy system. We recommend that work on energy security
should focus on achieving system resilienceboth to short
term shocks and longer-term stressesas well as focusing
on individual components of the energy system.
Development of an energy security
strategy
18. DECC has not published a strategy for achieving
energy security. This contrasts with its approach on climate change,
where a headline emission reduction target has been adopted and
strategies setting out how subsidiary targets will be achieved
are published.[24]
19. The department outlined four key areas of its
work on energy security: maximising economic recovery of indigenous
reserves; reducing demand for energy; ensuring a strong, resilient
market and infrastructure; and influencing other countries.[25]
DECC's website states that the Government's approach to energy
security "includes policies that encourage: free energy markets,
both in the UK and internationally; diverse energy sources; international
energy dialogue; and timely and accurate information to the market".[26]
While each of these activities may well contribute individually
towards greater energy security, they do not amount to a coherent
or strategic approach to energy security.
20. An energy security strategy should be published
in single, dedicated document.
21. One approach to energy security is to develop
different hypothetical scenarios and to conduct "stress tests"
on the system to try to understand how resilient it would be to
different types of threat. Examples of this kind of approach include
Ofgem's Project Discovery, Pöyry's report on gas security
of supply for DECC, Wood Mackenzie's report on downstream oil
infrastructure for DECC and the UK Energy Research Centre's paper
Building a resilient UK energy system.[27]
A robust energy security strategy could be built around
addressing the vulnerabilities identified in such studies.
22. DECC does carry out its own modelling work to
assess the impact of multiple shocks on the energy system.[28]
However, we were left unclear about the specific nature
of this work. This raises several important questions: does this
modelling consider the energy system as a whole, or is separate
modelling carried out on individual components (for example, on
gas, oil and electricity)? Does this modelling look only at potential
shocks that may happen in the short-term, or does it also consider
longer-term stresses on the system (such as increasing fossil
fuel prices or the need to decarbonise the energy system)? Is
modelling carried out at a macro level or does it takes into account
the geography of the UK's energy infrastructure? Finally, it is
unclear how the findings from this modelling work are used and
whether they feed into any kind of comprehensive security strategy.
23. We recommend that the Department describe
the scope of its energy security modelling and how the findings
are used. In addition, DECC needs to be clear about the "early
warning" signals that it uses to assess the risk profile
of each threat to energy security and be clear about the resilience
measures that it would need to adopt to mitigate risk to energy
security. It should then expose its methodology to public challenge.
Assessing progress
24. Part of the Committee on Climate Change's remit
is to assess progress towards climate change goals, and it makes
a detailed report to Parliament each year. This provides an independent
assessment against clearly defined targets. In contrast, DECC
and Ofgem jointly publish their own annual Statutory Security
of Supply Report, which provides a snapshot of the state of various
components of the electricity, gas and oil systems. [29]
The information in this report is not organised in a way
that makes it easy to assess what progress has been made against
the four priority policy objectives that DECC described to us.
The way that the document is structured (with chapters headed
"electricity", "gas" and "oil")
tends to put the focus on the physical security of fuel supplies
at the expense of other aspects of the energy system. The "oil"
chapter of the 2010 report did not include any comment on the
security of the petrol and diesel distribution system.[30]
25. It would be easier to monitor DECC's performance
on energy security if a set of indicators were adopted against
which DECC reported in the annual Statutory Security of Supply
Report.[31] The UK Energy
Research Centre has suggested that energy security indicators
should cover three broad aspects: resilience of primary energy
supply, resilience of energy infrastructure and resilience of
energy users. A full list of the indicators suggested by UK ERC
is included in Annex 2 as an example.
26. What a comprehensive set of energy security indicators
should consist of is for debate. However, they should include:
- Level of energy demandreducing
demand for energy can help to increase energy security.[32]
- Diversity of fuel suppliersa
diverse portfolio of fuel supplies (both in terms of number and
provenance) is more resilient than relying on a small number of
suppliers.[33]
- Energy pricesAffordability
is an aspect of energy security.[34]
- Fuel stock levelsFuel
stocks enhance energy security and gas storage in particular is
an important component of UK energy security.[35]
- Spare capacityspare
capacity (for example electricity capacity margin) means that
the system as a whole is able to withstand unexpected failure
in individual parts.[36]
- Capacity for Demand Side Response (DSR)the
degree to which energy users can voluntarily reduce consumption.[37]
Monitoring the level of reduction in demand that can be achieved
through DSR measures shows how much disruption to energy supplies
can be comfortably absorbed by the system.
27. DECC already collects much of the data that would
be needed for a set of energy security indicators for various
existing statistical publications (such as the Digest of UK Energy
Statistics, Energy Trends and Quarterly Energy Prices). Collating
this information and presenting an analysis of the implications
for energy security as part of the Statutory Security of Supply
Report would make it easier to assess the impact of policies designed
to improve energy security. New data might be required for an
indicator that measured the capacity for demand side response.
The collection and reporting of this information would help Parliament
and others to judge the Government's progress towards energy security.
28. The Government's Strategic Defence and Security
Review contained a pledge to "strengthen the delivery of
energy security objectives by more robust reporting and monitoring,
including by putting in place a transparent set of energy security
indicators in which the Government and its partners can have confidence".[38]
29. We recommend that the Government now publish
a transparent set of energy security indicators as promised in
the Strategic Defence and Security Review. These indicators should
cover primary supply of fuels, energy infrastructure and energy
users and include specific indicators on the overall level of
energy demand, diversity of fuel supplies, energy prices, fuel
stocks, spare capacity and capacity for demand side response.
30. We recommend that DECC should report against
a set of energy security indicators on an annual basis as part
of its Statutory Security of Supply Report as its contribution
to the reporting on the Strategic Defence and Security Review
indicators.
13 Q 1 [Mitchell], Q 2 [Stevens], Q 174 [Meeks], Ev
w138, Ev 177, Ev w68, Ev 170 Back
14
DECC, Business Plan 2011-2015, available at www.transparency.number10.gov.uk,
accessed 6 July 2011 Back
15
Q 430 Back
16
The Langeled pipeline transports gas from Norway to the UK and
has the capacity to provide up to 20% of the UK's peak demand. Back
17
Ev w21, Ev w55, Ev 148, Ev 180 Back
18
Ev w138 Back
19
Q 55 [Strachan] Back
20
Modassar Chaudry, Paul Ekins, Kannan Ramachandran, Anser Shakoor,
Jim Skea, Goran Strbac, Xinxin Wang, Jeanetter Whitaker, Building
a Resilient UK Energy System, Research Report, ref UKER/RR/HQ/2011/001,
14 April 2011, pp 14-15 Back
21
Ev 170, Q 360 [Harrison], Q 363 [Harrison] Back
22
For example, using large amounts of wind energy reduces fossil
fuel imports but makes the electricity system more difficult to
operate. Back
23
Q 363 [Kemp] Back
24
DECC, The UK Low Carbon Transition Plan, 15 July 2009;
(a new strategy on achieving the 4th carbon budget
will be published in Autumn 2011) Back
25
Ev 112 Back
26
www.decc.gov.uk/en/content/cms/meeting_energy/en_security/en_security.aspx
(accessed 16 August 2011) Back
27
Ofgem, Project Discovery Energy Market Scenarios, Ref:
122/09, 9 October 2009; Pöyry, GB Gas security of supply
and options for improvement, March 2010; Wood Mackenzie, UK
Downstream Oil Infrastructure; Modassar Chaudry, Paul Ekins,
Kannan Ramachandran, Anser Shakoor, Jim Skea, Goran Strbac, Xinxin
Wang, Jeanetter Whitaker, Building a Resilient UK Energy System,
REF UKERC/WP/ES/2009/023, 31 March 2009 Back
28
Q 432, Q 435 Back
29
DECC and Ofgem, Statutory Security of Supply Report, November
2010, HC 542 Back
30
DECC and Ofgem, Statutory Security of Supply Report, November
2010, HC 542, pp 42-46 Back
31
A forthcoming Parliamentary Office of Science and Technology POSTnote
will explore this topic in more detail. Back
32
Q 27 [Mitchell], Q 55 [Strachan], Q 57 [Jenkins], Q 70 [Strachan],
Q 360 [Harrison], Ev w134, Ev w138, Ev 139, Ev 211, Ev 112, Ev
w105, Ev w83, Ev 170, Ev w149, Ev w62, Ev w59, Ev 204, Ev 164,
Ev w35, Ev 148, Ev w25, Ev w154, Ev 228 Back
33
Ev 139, Ev 211, Ev 121, Ev 159, Ev 144, Ev 112, Ev w70, Ev w83,
Ev w131, Ev w75, Ev 180, Ev w36, Ev w8, Ev 204, Ev w143, Ev 164,
Ev 148, Q 59 [Jenkins], Q 86 [Hanafin], Q 103 [Hanafin], Back
34
Q 1 [Mitchell], Q 2 [Stevens], Q 174 [Meeks], Ev w138, Ev 177,
Ev w68, Back
35
Ev w40, Ev w138, Q 105 [Hanafin], Q 39, Ev 132 Back
36
Q 65 [Strbac], Q 92 [Rigby], Q 148 [Winser], Q 418 [Ling] Back
37
Ev w83, Ev 180, Ev w36, Q 57 [Jenkins, Strbac and Strachan] Back
38
HM Government, Securing Britain in an Age of Uncertainty: The
Strategic Defence and Security Review, Cm 7948, 2010, p 51 Back
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