Energy security and its importance to economies

Energy security was put in first topographic point among the precedences confronting the European Union. Although the jobs of guaranting energy security were standing in forepart of a united Europe from the beginning of the integrating procedure in recent old ages they have acquired the greatest relevancy and importance for the EU. This is due to today ‘s EU dependance of 50 % on external energy supplies to its market and on the policies pursued by provider provinces. In add-on, European states are concerned about the well-known jobs with the energy supply for them against the background of convulsion between Russia, as the chief EU energy provider and Belarus and Ukraine, through whose district the Russian hydrocarbons are delivered to the West. Russian-Ukrainian draw on the issue of gas monetary values and transit is the major concern of EU member provinces and oblige them to speak about the demand to diversify energy supplies.

Concentrating 7 % of universe population, more than a one-fourth of universe GDP and 20 % of universe trade, the EU has merely 2 % of the universe ‘s “ black gold ” and 4 % natural gas. Restriction of its ain resource base in Europe histories for a important dependance of the EU on external energy supplies. The European natural gas market is the 3rd largest in the universe. The volume of gas ingestion in EU states reached 513 billion M3s ( 21 % of universe ingestion ) . Russia is the 2nd largest EU oil provider and provides 33 % of the EU “ black gold ” demands. The Russian Gazprom is the leader in EU natural gas supplies with 46 % of entire. If we talk about security of energy supplies, the chief undertaking in this country is the energy sectors geographical and resource variegation i.e. the enlargement of supply beginnings, supply paths and grapevines.

The EU security in energy sector

Since the industrial revolution in Europe, energy demands have growing at a steady rate. In add-on, non merely industry but the modern manner of life besides increases this demand. The European Union consumes more and more energy every twelvemonth, therefore the balance of energy is important for European security. Energy production within the EU is lacking and as a consequence external energy dependence is invariably increasing. Oil monetary values have tripled since March 1999 ; accordingly, recovery of the European economic system may be disrupted. This one time once more foreground the European Union ‘s structural lack refering energy supply. Today, about 50 % of the oil and gas supply is provided by imported merchandises. However, if no steps are taken, import in the following 30 old ages will cover over 70 % of energy demands. In recent decennaries at that place has been a alteration in European energy policy, chiefly as a consequence of developments in economic, political and ecological domains. Ever present concern about clime alteration, the EU expansion and the liberalisation of energy markets will besides impact energy policy. The big figure of international understandings presence and earlier given features and tendencies in the EU energy sector, creates restrictions and troubles in accomplishing energy stableness and security. Therefore, these alterations imply many moves and attempts which must be undertaken in the field of energy demand and supply. Energy security depends non merely on differences in the beginnings and providers, but besides on the full composite of steps aimed at increasing energy efficiency. Supplying safe energy supply, free trade, energy market liberalisation and environmental protection are the primary undertaking for energy policy shapers.

In the past 15 old ages, the EU has begun the gradual organisation of its attempts to accomplish energy security. Admission of new members has merely emphasized the demand to incorporate the energy markets and grids in common free market. During past decennary was conducted a big system accommodations and it was improved the overall energy system efficiency, but energy dependence even increased ( tablica ) .

Table Ten: Energy dependence rate, EU-27, 1997-2007 ( % of net imports in gross inland ingestion and sand traps, based on metric tons of oil equivalent )

Production and ingestion

Production

Energy production in the EU is on a downward tendency. In 1997 production amounted to 962.4 toe[ 1 ]and up to 2007 fell to 849.6 toe. The cause of this tendency is the diminution of energy production among old EU members, while in the freshly admitted ( except Poland and Romania ) production even increased. This downward tendency is a consequence of the gradual exhaustion of resources or their development was found uneconomic.

Energy production was dominated by the United Kingdom with 27.3 % in 1997 but its engagement fell to 20.4 % in 2007. The 2nd largest decrease in energy production was registered in Poland, where the diminution compared to 1997 is 27.7 % , largely because of coal usage decrease. Other EU economic systems are by and large kept old degrees of production with a gradual addition in the portion of renewable beginnings.

Energy production in the EU varied ( figure 1 ) with the important portion of atomic energy by 28.4 % . Highest degree of usage of atomic energy is in Belgium 90.7 % , France 84.6 % , Lithuania 72 % , and Slovakia 70.3 % . There is a characteristic illustration of France, which in add-on to atomic energy merchandises about 14 % of renewable energy. About fifth part of the EU member provinces over 50 % of energy production get from solid fuels, chiefly coal. Natural gas is more prevailing with approximately 19.7 % in 2007 and the tendency of farther addition in the portion.

Graph 1: Beginning Eurostat, Production of primary energy, EU, 2007

( % of entire, based on metric tons of oil equivalent )

Renewable energy beginnings make up 16.3 % of production and their portion is turning. Particularly strong growing was since 2002 as a consequence of strong investing in this sector. The European Commission adopted ambitious aim, cut downing CO2 emanations and put a end that by 2020 the entire portion of renewable energy beginnings have to be 20 % of ingestion. But, these aims are improbable to be achieved[ 2 ]. Other manner of cut downing CO2 emanation is by replacing oil and coal with natural gas. The burning of natural gas emits about 30 % less C dioxide than oil, and 45 % less C dioxide than coal. This can be an optional manner to accomplish cut downing emanation aims, but this will bit by bit take the EU to increasing energy dependence.

Consumption

The EU energy ingestion in 2007 was 1836 mil. toe or 15 % of entire universe ingestion. By comparing, the U.S. consumed 2339 mil. toe which is 7.55 per capita compared to 3.6 toe per capita in the EU. There is a steady growing in ingestion, so between 1990 and 2007 there was an addition in energy ingestion in the EU of 8.7 % .

The dominant beginning of energy in the EU is oil with 36 % , but the fastest turning portion of ingestion of the old decennary had natural gas and presently makes 24 % of entire. Increasing ingestion of gas was traveling chiefly on coal history which ingestion is reduced as the largest beginning of pollution. The usage of coal is regulated by European committee Directive 2001/80/EC where was ordered that all generators of 50 megawatts have to cut down nursery gas emanations or face the closing. Besides, one of the of import grounds to cut down coal usage, is spread outing usage of natural gas from Russia, Norway and Algeria trough pipelines every bit good as the usage of liquified natural gas ( LNG ) from Nigeria.

Nuclear power presently provides 14 % of entire energy ingestion. Part of the EU states oppose the usage of atomic energy because of possible incidents, but duologue that is underway should take to a Renaissance of atomic energy sing the turning job with clime alteration caused by firing fossil fuels. Renewable energy beginnings make up 9.2 % of entire disbursement with the greatest portion of biomass and wastes, hydropower and weave energy.

The European Commission adopted a European Strategy Energy Technology Plan ( SET Plan ) which provides an effectual low-carbon policy and efficient energy engineerings by “ undertaking the challenge through a policy whose mark is nil less than the transmutation of the full energy system, with far-reaching deductions on how we beginning and bring forth our energy, how we transport and trade it, and how we use it. ”[ 3 ]

The European Commission Response – policy

Despite European Commission attempts, the European internal energy market is still fragmented. Member provinces have different national regulations and patterns with many barriers to open and just competition. Today many national companies de facto have monopoly in member provinces. This place is comfy for them but straight work stoppages to the Hart of energy policy. Some member provinces have regulated energy monetary values despite many ordinances sing this mater. There is really frequently a deficiency of common entree to 3rd parties, peculiarly in dialogue with energy providers. For illustration, Russia is reasoning bilateral understandings with the EU members and hence, really frequently monetary values are unreasonably different. For case, Russian gas base on ballss trough Ukraine, Slovakia and Czech Republic and terminates in Germany with lowest monetary value for German consumers ( excepting Ukraine ) . The monetary value issue was besides raised by Latvia, which pays 30 % more than Germany for Russian gas. Electricity and gas markets are non still individual market, so Community must unify in negociating gas monetary values with Russia. But, to beef up its place in dialogue, internal interconnectednesss are to be established along with common energy market.

The EU is at get downing of making common gas and electricity market. These attempts are constrained with transit interconnectednesss. On December 2005, the EU Head of State and Government recognized demand for common response and gave full support to Commission.

The recent European Commission papers, “ Energy 2020 – A scheme for competitory, sustainable and unafraid energy ” gives model which spells out what is expected from EU in energy sector. This Strategy includes Lisbon Treaty[ 4 ]energy policy cardinal ends such as security of supply, fight and sustainability. The new energy scheme focuses on following five precedences[ 5 ]or terminals:

Achieving an energy efficient Europe ;

Constructing a genuinely pan-European incorporate energy market ;

Empowering consumers and accomplishing the highest degree of safety and energy security ;

Extending Europe ‘s leading in energy engineering and invention ;

Strengthening the external dimension of the EU energy market.

Each of these precedences requires its ain scheme to be achieved. Nonetheless, all of them are profoundly interrelated and in many overlapped. For case, energy efficiency was set to be improved up for 20 % until 2020, but, accomplishing this precedence is impossible without uniting salvaging energy steps within energy bring forthing sector, transporting sector as to devouring sector particularly. Furthermore, undertaking waste energy losingss trough all ironss of energy sector, the EU energy scheme 2nd end, guaranting the free motion of energy, is non merely guaranting cheapest and procure energy by enabling common attack to 3rd parties but, besides bettering energy efficiency excessively.

Diverseness in beginnings and providers

NABUKO I EU

The European Union is seeking to protect ego from energy dependance on Russia with variegation of natural gas supplies policy by understandings with non-conventional energy providers, the Caspian provinces ( Caspian provinces have merely 4-5 % of universe ‘s gas militias ) . But due to the undependability of Russian energy supplies through 3rd states ( Belarus and Ukraine ) every bit good as the possibility of utilizing Russian resources as a political tool, transporting Caspian Sea hydrocarbons ( Azerbaijan, Kazakhstan and Turkmenistan ) to the West has acquired great importance to the EU.

Improve supply dependability and energy security EU responsible execution of the Southern Gas Corridor. The planned corridor is composed of three parts: the Trans-Caspian gas grapevine ( the undertaking provides for bringing of natural gas from Kazakhstan and Turkmenistan to Azerbaijan ) , Baku – Tbilisi – Erzurum ( from Azerbaijan through Georgia to Turkey ) and Nabucco ( from Turkish district, via Bulgaria, Romania, Hungary Austria ) .

Therefore, the dependability of energy supply in Europe is due to the altering geographics of supply, increasing the figure of exporting states, the creative activity of new substructure installations.

In the face of increasing competition from non-traditional providers of hydrocarbons Russia is really of import to keep the fight of their energy in the European market, to guarantee effectual and dependable conditions for their theodolite to Western Europe.

From the European Union class to diversify energy imports implies Russia ‘s post-Soviet infinite disincentive, to avoid direct or indirect control by the latter over the excavation sector and theodolite substructure in environing countries.

Uncovering in this respect, the function of such organisations as the GUAM ( Georgia, Ukraine, Azerbaijan and Moldova ) , which can be an active participant in “ non-Russian ” energy supplies to European markets.

Major energy undertakings GUAM is the “ White Stream ” . White Stream – the thought of the Ukrainian side to diversify natural gas supplies to Europe and Ukraine and cut downing dependance on Russia. Harmonizing to the construct of developers this grapevine should go through along the Eurasiatic oil conveyance corridor, i.e. from Azerbaijan to the Georgian port of Supsa, and so across the Black Sea to Ukraine and forth to the EU, short-circuiting Russia.

From a geopolitical point of position, the creative activity of conveyance corridor from E to west, short-circuiting Russia, on a program of Brussels, will:

To diversify energy supplies to cut down dependance of the EU from Russia and therefore guarantee energy security ;

Dismantle the conveyance system of the former Soviet Union, mostly through the district of Russia and provides strategic control over the export of Central Asian energy resources ;

Open the way to European Union cooperation with states seeking to set up independent from Russian energy transit paths ;

Establish control over the hydrocarbon resources of the part and non to let these resources were available to Russia ;

At the disbursal of control over energy resources to guarantee the constitution of political control over the states of the part ;

Set the geopolitical pluralism, independency ( from Russia ) , the freshly independent provinces.

Execution of the EU undertakings such as the Nabucco, whose design capacity is 30 billion m 3 of gas per twelvemonth, is a complex challenge for the Russia ‘s national involvements towards Europe and tangibly affects Russia ‘s foreign policy and foreign economic activity.

Russian energy resources – development and policy

Energy policy

For Russia ‘s energy sector, European way traditionally occupies a prima place in energy resources trade. The EU consumes 53 % of Russian oil exports and 62 % of natural gas.

For Russia, with its alone geographical and geopolitical place, the energy theodolite job has peculiar importance. This implies the undertaking of guaranting uninterrupted supplies of Russian energy merchandises to Europe. Russian natural gas is transferred to Europe through 12A grapevines. Three of them are direct ( to Finland, Estonia and Latvia ) four are through Belarus ( farther to Lithuania and Poland ) and five through Ukraine ( farther to Slovakia, Romania, Hungary and Poland ) .

As to better energy supply to the EU, Russia has to develop and implement a broad scope of policy and energy enterprises along with carry oning major transit investings. Passionate desire of Russia to happen new paths for transporting oil and gas to the EU, short-circuiting the neighbours ( Belarus and Ukraine ) has a good ground – a diverseness of paths is of import because it allows non to depending on the temper of the theodolite state.

Presently is under building the North European Gas Pipeline “ Northern streamA» ( Nord Stream ) which runs under the Baltic Sea from Vyborg, Russia to Greifswald Germany. The Northern Stream is a grapevine investing which has been agreed between Russia and Germany. This undertaking will be operated by Nord Stream AG, a common company owned by Gazprom ( 51 % of portions, Russia ) , BASF ( 20 % , Germany ) , E.ON ( 20 % , Germany ) , and N.V. Nederlandse Gasunie ( 9 % , Netherlands ) . Capacity is projected up to 55 billion M3s of natural gas per twelvemonth. Completion of this undertaking will assist to get down work outing the gas export capacities variegation job. In add-on, new grapevine will spread out supply capacities to Europe and the execution of Russia ‘s duties under the concluded and the future long-run contracts for the natural gas supplies.

The 2nd undertaking is the South Stream grapevine which is planned to transport natural gas from Russia through Black Sea, Bulgaria and farther to Austria and Italy. The grapevine will be built and operated by numbered companies but largely by Gazprom ( Russia ) and Eni ( Italy ) . The South watercourse will run under the Black Sea from Novorossiysk to the Bulgarian port of Varna, and so split into two subdivisions. First subdivision will go through through Serbia and Hungary to Austria and the 2nd one through Greece and end to Southern Italy. Capacity will make 60 billion M3s of natural gas per twelvemonth. All states trough which grapevine will go through are really interested in this undertaking in order to avoid hazards in supply such as the gas deficit during The Russia – Ukraine gas struggle in 2006 and 2008.

The chief aim of these undertakings is to supply direct communicating between the marketer ( Russia ) and clients ( Western, Central and South-Eastern Europe ) , short-circuiting the district of Belarus and Ukraine, and grapevines Urengoi – Pomary – Uzhgorod and Yamal – Europe.

As a Eurasiatic power, Russia is of course interested in holding free custodies in its energy policy in all waies. At the terminal raises the inquiry of rectifying the current dissymmetry of Russian energy exports in favour of the eastern way. Russia ‘s national involvement is to diversify markets for energy resources, spread outing the geographics of supplies of hydrocarbons. Due to this, Russia reduces dependance on the possible hazards and, of class, opens up new and promising markets.

To come in the Asia-Pacific part will make a grapevine “ Eastern Siberia – Pacific Ocean ( ESPO ) grapevine, which would link the oil Fieldss of Western and Eastern Siberia to the ports of Primorsky Territory in Russia and supply entree to the markets of the Asia Pacific part.

This grapevine capacity of 80 million metric tons a twelvemonth must go through from the Taishet ( Irkutsk part ) , north of Lake Baikal through Skovorodino ( Amur part ) in the Pacific Kozmino Bay ( Primorsky Krai ) .

The precedence of Russian foreign energy policy includes the building of a subdivision in China from being built oil grapevine “ Eastern Siberia – Pacific Ocean. Power mercantile establishment will be 15 million tones a twelvemonth.

The execution of the above undertakings will supply an chance to work out at the same time the two most of import geo-economic and geopolitical aims: supply a manner out of Russian petroleum oil to the quickly turning market of the Asia and the Pacific part and cut down dependance on the chief purchaser of energy.

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Inclinations of development of universe energy markets and energy security issues

Malo history, why energy is needed, important statistics

In our fast underdeveloped universe, harmonizing to recent forecast, energy ingestion can turn up to 30 % within following 15 old ages. World oil demand can became higher for 42 % and natural gas ingestion will lift for approximately 60 % .

Today ‘s universe market is characterised with four most of import fortunes:

crisp rise of energy demand in developing Asiatic states ( up to 45 % of perspective universe growing in oil ingestion )

increasing spread between demand and production volume of gas in economically developed states ( for illustration, by 2020 between 60 % and 70 % of gas ingestion in Europe will be provided with the history of imports )

deficient capacity for the production, processing and transit of oil and gas every bit good as the limited possibilities of new sites

deficient transparence of universe energy market

All these conditions presented to the bow the job of energy security. Besides, the globalisation procedure with which the universe has faced in the 20th century, straight affect the domain of universe energetic[ 6 ]. The tremendous energy demand growing in Asia intensified competition for stable and inexpensive energy beginnings and in many parts of the universe ( particularly rich in energy resources ) happening instability and struggles. These fortunes contribute to energy instability and big fluctuations in energy monetary values. World militias of inexpensive energy are reduced, crossed the zenith of production while ingestion is turning steadily. In visible radiation of these fortunes should be considered planetary procedures in the energy sector. If we take in consideration allotment of universe ‘s energy militias, it can be seen that every portion of the universe has some militias or militias are allocated within sensible scope ( e.g. Russia energy militias are sufficient to cover lifting European demand, Gulf of Mexico and Venezuela militias are most convenient to America ) Dijagrami. Expert ‘s assessment say that there is sufficient energy militias, but the cost of development traveling to be sufficiently higher. World of inexpensive and accessible energy is decidedly behind us. It is necessary to advert clime alteration and easy turning inclination of decrease in CO2 emanations which will impact the ingestion of fossil fuels but the planetary demand will non be reduced.

Achieving planetary energy security will be reached by the universe community execution of steps in three chief countries:

Reliable supply of the universe economic system traditional signifiers of energy ;

Increase the efficiency of energy resources and environmental protection ;

Development and usage of new energy beginnings.

All universe and particularly developed states and largest energy providers have to lend to accomplishing energy security.

Basic rules of energy security

Despite all the differences in the attacks of major provinces, there are common points in the understanding energy security. In fact, it is possible to insulate the basic rules that are more or less shared by all provinces.

Energy security is the common duty of both the energy consumer and the energy provider. This is acknowledged by all, but the jobs arise where the consumer and supplier Begin to demand each from other guarantees of supply or pay for these supplies. For illustration, in a moderate discrepancy, the demand for guarantees of supply can take to the consumer ‘s petition to let him stand foring the economic involvements of the company for development and transit of energy resources in the supplier state. This is the instance where the EU requires from Russia opening its energy sector for European investings. On the other manus, Russia sets demands of direct accessing to the client bringing systems. In the extremist version confidence of supply can be expressed in direct political and economic command towards supplier state, up to transporting out military operations against them. Besides, in the recent history we have witnessed that supplier state can enforce steps such as bringing cutoffs, which affected non merely targeted states but many others ( Russia – Ukrayina and Russia – Belarus disputes ) .

However, there is a 3rd option, presented by Asiatic states. It is the willingness to vouch bringing due on the one manus, the engagement of companies stand foring the economic involvements of consumers in developing energy resources in the supplier state, on the other – playing by the regulations of the supplier state and puting to a great extent in substructure, excavation and transit. In this instance, it is non a simple commodity-payment strategy, but a more complex investing, insurance and other contractual relationships. The consumer provides his confidence of supply at the disbursal of investing in substructure supplier, so as to optimise the supply concatenation, doing it more modern, less dearly-won, etc. Suppliers, leting consumers to develop undertakings in their district introduce non merely secure and stable market, but besides a strategic investor.

Therefore, we are speaking about the rule of duty and mutuality of consumer and supplier[ 7 ].

Further, despite the limited figure of states that act as energy providers, development of events shows that there is competition between them ; furthermore, the really limited figure of providers can toughen this competition. Factor that stimulates competition among suppliers is decidedly another rule called variegation of beginnings and providers. At the minute there is competition between energy providers and it must besides be built into the system of planetary energy security.

The most of import status for this is the energy security depoliticization. In fact, the competition based on economic rules, competition for consumers is logical and apprehensible phenomenon. However, any usage of energy resources for political intents in the state of affairs of lifting demand leads to conflict, effects of which can be unpredictable. Every effort to set energy as a topic of political struggle is challenge to the planetary energy security system. Therefore, the rules of energy security are besides the depoliticization and just competition. Furthermore, if we can show the competition between providers, it is much more serious phenomenon the competition between consumers. The planetary decrease of energy production will connote the competition among energy purchasers and accordingly instability in peculiar parts could look.

Economic development without stabile energy supply is impossible. Therefore, get the better ofing planetary jobs such as poorness, epidemics, hapless instruction, environmental challenge, without economic stableness is unachievable. Energy supply and demand, market competition, articulation investings, planetary heating, CO2 emanations, joint stableness and many other factors indicate that energy security is chiefly a planetary issue so we can indicate at another rule, the rule of globality.. In this context, we should non bury that energy security is inseparable portion of a planetary security system.

Looking the importance of energy for the quality of life and life in general, it is necessary to stress the rule of societal orientation of energy security for both single states and the universe at big.

Definitions

The IEA/OECD specify one toe to be equal to 41.868 GJ or 11.63 MWh. Some administrations use other definitions of toe, for illustration:

1 toe = 42 GJ

1 toe = 41.87 GJ

1 toe = 7.11, 7.33, or 7.4 barrel of oil equivalent ( boe )

1 metric tons crude oil equivalent ( TPE ) , as used in renewable energy, 45.217 GJ.

Conversion factors

1 barrel of oil equivalent ( boe ) contains about 0.146 toe ( i.e. there are about 6.841 boe in a toe ) .

1 t Diesel = 1.01 toe

1 m3 Diesel = 0.98 toe

1 Ts petrol = 1.05 toe

1 M3s petrol = 0.86 toe

1 t biodiesel = 0.86 toe

1 m3 biodiesel = 0.78 toe

1 t bioethanol = 0.64 toe

1m3 bioethanol = 0.51 toe

1 MWh = 0.22 toe ( assumes 39 % thermic to electrical transition efficiency )

1 MWh = 0.086 toe

It is of import to observe that toe should be used carefully when change overing electrical units – for case, BP ‘s 2007 study used a factor of 38 % efficiency ( the norm efficiency of OECD thermic bring forthing units in 2006 ) , or approximately 16 GJ per toe, when change overing kilowatt-hours to toe.