September 2, 2014
The Ministry of Economy has put out for initial public consultation a draft of the Polish Energy Policy until 2050. As could be expected given the current tensions between the EU, US and Russia, Poland’s energy security topped the triad of sustainable growth objectives. The draft is accompanied by projections and simulations, which lead to two conclusions of particular relevance to energy security. We can expect a major scaling-up in capital expenditure on energy infrastructure (from around PLN 18bn today to an average of PLN 26−37bn per annum until 2050) and a rising share of energy generated from imported fuels in the total energy output. The intensity of energy imports increases with all available technologies planned to be used, as well as construction of new lignite mines, increased share of RES, and nuclear power generation. With the capital expenditure requirements expected to be the highest in the period until 2020, and considering that the domestic capital will not bear the load of huge energy projects, we are in a need of foreign investors. What if they fail to arrive on time? Will our reliance on imports not affect our energy security?
Let me refer to the concept of energy security as defined by Daniel Yergin, an American economist and one of the most influential experts in oil and energy, in his latest book „The Quest. Energy, Security, and the Remaking of the Modern World”, which has been translated into Polish.
“The usual definition of energy security is pretty straightforward: the availability of sufficient supplies at affordable prices. Yet there are several dimensions. First is physical security—protecting the assets, infrastructure, supply chains, and trade routes, and making provision for quick replacements and substitution, when need be. Second, access to energy is critical. This means the ability to develop and acquire energy supplies—physically, contractually, and commercially. Third, energy security is also a system—composed of the national policies and international institutions that are designed to respond in a coordinated way to disruptions, dislocations, and emergencies, as well as helping to maintain the steady flow of supplies. And, finally and crucially, if longer-term in nature, is investment. Energy security requires policies and a business climate that promote investment and development to ensure that adequate supplies and infrastructure will be available, in a timely way, in the future. Oil-importing countries think in terms of security of supply. Energy-exporting countries turn the question around. They talk of “security of demand” for their oil and gas exports, on which they depend to generate economic growth and a very large share of government revenues—and to maintain social stability. They want to know that the markets will be there, so that they can plan their budgets and justify future levels of investment.)”
What drew my attention was not the definition itself but the very enlightening clarification that follows. It addresses international relations and their growing role in ensuring security of energy systems, a dimension of energy security which, I believe, has not received sufficient recognition in the draft Energy Policy.
“But the dependence on energy systems, and their growing complexity and reach, all underline the need to understand the risks and requirements of energy security in the twenty-first century. Increasingly, energy trade traverses national borders. Moreover, energy security is not just about countering the wide variety of threats; it is also about the relations among nations, how they interact with each other, and how energy impacts their overall national security”.
In the context of the national debate on Poland’s energy security, it is worth mentioning the point depicted in the book at which energy security became a decisive factor in international relations. This happened more than a century ago and concerned the possible conversion of battleships of the British Royal Navy from coal to oil. In 1911 Winston Churchill, then First Lord of the Admiralty, made the historic decision to “base Britain’s naval supremacy upon oil”. Oil was to make the ships of the Royal Navy faster and more flexible than those of Germany’s growing navy, giving Britain a critical advantage in the Anglo-German naval race. It was a bold and much criticised decision as conversion meant that the Royal Navy would rely not on coal from Wales but rather on oil supplies that were six thousand miles away—in Persia. How could reliance on foreign energy sources in the strategic military area possibly enhance the national security?
Defending his decision before the Parliament, Churchill used an argument which would become a fundamental touchstone of energy security: diversification of supply. “On no one quality, on no one process, on no one country, on no one route, and on no one field must we be dependent. Safety and certainty in oil lie in variety and variety alone”.
Where lie the limits of energy independence? Is energy independence a realistic goal for a country strongly linked with the global economy? Yergin and other experts have pointed out that the term “energy independence” itself is wrongly interpreted; it should be understood not as “import-free” but rather as “not vulnerable”. Generally, however, it is understood to mean self-sufficiency. History has shown that it is difficult for a nation to gain a full independence from foreign energy or, at least, from foreign oil supplies. What we can do is pursue energy security by systematically reducing vulnerability to threats. In a globalised world, energy independence no longer guarantees security; it is just the other way round—it is energy security that guarantees independence.
Energy security is not limited to oil, natural gas and coal. Electric power blackouts in North America—such as the one that shut down the northeast of the United States in 2003—and in Europe and Russia, generate worries about the reliability of electricity supply systems. A realisation of the scale of the problem came in 2012, when a power grid failure left 670 million people, or approximately one-tenth of the world’s population, without electricity. Hurricanes Katrina and Rita in 2005 and the tsunami that struck Japan in 2011 made it clear how vulnerable energy security is to natural disasters. Cyber-attacks are also increasingly a threat to energy systems.
We will not be able to counter these threats if we don’t realise that, although it affects individual countries, contemporary energy security, due to its reliance on the level of security of energy systems, is a global issue. This goal cannot be attained without coordinated policies and actions and without continued cooperation. This is particularly true in the context of the tense geopolitical situation we are witnessing today.