Energy Security Gets Local

The move to ‘electrify everything’ will reduce reliance on global oil and gas markets but brings new risks in energy security, writes Ed Birkett.

By Ed Birkett

April 13, 2021

Conventional wisdom holds that a globalised economy means highly interdependent trade, long supply chains and globalised risks to security, including energy security. To make matters worse, climate change will exacerbate these risks through extreme weather, conflicts over scarce resources and climate refugees. The coronavirus pandemic exposed the downsides of how a globalised economy reacts to crises, whether through bans on the export of personal protective equipment or accusations of vaccine nationalism. The recent saga of the Ever Given cargo ship stuck in the Suez Canal adds to a sense that the globalised economy is brittle. This brittleness could particularly affect global energy security, given the reliance of energy trade on shipping pinch points in the Strait of Hormuz, Strait of Malacca and the Suez and Panama canals.

However, the imperative to reduce greenhouse gas emissions to ‘Net Zero’ means structural changes in the type of energy that we use; in particular, we will use more electricity and less oil and gas.[1] This structural shift means that if the lights go out, it’s as likely to be caused by problems within national borders or in neighbouring countries as by conflicts in oil- and gas-producing nations or due to disruptions to global trade. Unless countries shift the focus of their energy security policy to their electricity sector and neighbouring markets, countries risk sleepwalking into the types of failures that have recently crippled the electrical grids in Texas and California.

In a Net Zero world, electricity is the key to energy security.

Today, energy security is predominantly ensured through secure supplies of oil and gas, and to a lesser extent coal, backed by strategic reserves that can be released at times of national or international crises. The UK’s Statutory Security of Supply Report details how diverse international supply of oil and gas is a key component of the UK’s energy security, with pipeline supplies complemented by global shipments of oil and Liquified Natural Gas (LNG).[2]

Even when international oil and gas markets are functioning well, domestic disruptions can still threaten energy security. In the UK, the Government maintains access to a reserve fleet of oil trucks and tanker drivers to counter the risk of extreme events, including any repeat of the industrial action proposed by tanker drivers in 2012.[3],[4] In the United States earlier this year, blackouts in Texas were caused by a large-scale failure of the gas system and the knock-on reduction in electricity supplied by gas-fired power stations.[5] These incidents both suggest that short-term risks to energy security are indeed likely to be caused by oil and gas shortages. However, rapid changes in countries’ energy mixes, driven by the Net Zero agenda, will lead to a new set of risks for the energy sector predominantly focused on the electricity sector itself.

To hit Net Zero by 2050, the Climate Change Committee forecasts that the UK must use 85% less oil and two-thirds less natural gas, whilst electricity consumption will more than double.[6] This additional electricity demand will be met predominantly through low-carbon sources such as wind, solar and nuclear. By 2050, electric vehicles will largely replace petrol and diesel vehicles, and electric heating systems will largely replace natural gas boilers. This shift means that the UK will rely less on global markets for oil and gas, and more on electricity, which is predominantly traded domestically and regionally due to the cost and technical difficulties of transmitting electricity across continents.

Risks to electricity supplies are different to those for oil and gas

Electricity systems can only operate if supply and demand is balanced at all times and, in contrast to oil and gas, large-scale electricity storage is expensive and therefore not yet widespread. Whereas oil and gas can be transported through a mix of physical pipelines and ships, electricity must be transmitted through physical cables between and within countries. This reliance on fixed links means that countries can only trade electricity with their neighbours rather than accessing a global market; in the case of the UK, the country is only connected to electricity systems in EU Member States and in Norway. Physical links are vulnerable to failures, be they caused by technical faults or collisions with ship anchors.[7],[8] Undersea cables are also vulnerable to foreign interference, as highlighted by now-Chancellor Rishi Sunak MP in a 2017 report for Policy Exchange, Undersea Cables: Indispensable, insecure.[9]

Electricity supply and demand is highly dependent on weather conditions, particularly as countries rely on weather-dependent wind and solar for more of their electricity. Electricity systems must be robust to long periods of low wind output, like those experienced in the UK,[10] and fast drops in solar output as the sun goes down. To date, grid operators have dealt admirably with a rising share of intermittent generation, relying on innovative solutions like fast-acting batteries to smooth out second-by-second fluctuations in output.[11] However, grid operators still rely on conventional gas-fired power stations to meet the inevitable lulls in wind and solar output; gas-fired power stations that the Climate Change Committee says the UK should close by the mid-2030s.[12]

Climate change will pose new challenges for electrical grids, already seen in California’s programme of rolling blackouts, known as Public Safety Power Shutoffs, that aims to reduce the risk of wildfires started by fallen electrical lines. As droughts become more common in certain regions, the impact of falling electrical lines, which is not uncommon, becomes more severe.[13] Similarly, more extreme or unpredictable weather would make it more difficult for network operators and power station owners to plan when they can schedule maintenance without jeopardising energy security, one factor cited in this year’s blackouts in Texas.[14]

A three-point plan to manage new risks to energy security

The growing reliance on electricity means that governments need new plans to ensure energy security. Here, I propose a three-point plan to analyse and prepare for the local and regional risks to electricity supplies.

Firstly, governments must improve their preparedness for disruptions to electricity supply, adopting military techniques like ‘red teaming’ to war game how governments and the electricity system would respond to extreme events. For example, in a UK context, how would the Government respond to a coordinated military offensive disabling subsea electricity cables? Similarly, how would the UK’s electricity system, with its increasing imports of electricity from the EU, respond to mass outages of the French nuclear power fleet due to the discovery of faults common to several reactors, as happened in 2016?[15]

In addition, governments must prepare for how climate change will alter the risks to the electricity system. For example, how will demand for air conditioning rise as the number of hot days increases? Could demand for electricity in Northern European countries like the UK peak in summer, driven by air conditioning, rather than in winter, driven by heating?

Conventional probabilistic approaches to assessing energy security may no longer be fit for purpose, with the key variables like extreme heat and precipitation uncertain and changing due to climate change. In 2019, the UK Government’s Panel of Technical Experts raised exactly this issue, noting that, although it would be difficult to model, changing market circumstances mean that the Government and grid operator must pay extra attention to “Black Swan” events and combined failures of generators that would threaten the security of the electricity system.[16]

Secondly, governments must assess whether they can really rely on electricity supplies from neighbouring countries in an emergency situation. The coronavirus pandemic has served as a reminder that, in situations of extreme duress, national interests may trump regional or global considerations, whether for vaccines, medical supplies or protective equipment for healthcare professionals. For energy security, this means considering scenarios where whole regions are short of electricity, be that due to low rainfall levels reducing output from hydropower dams, weeks-long lulls in wind power, or lack of fuel for power stations.

The technical properties of electricity systems lead to interesting and perhaps unexpected dynamics for energy security. For example, the continental European electricity grid is a single “synchronous area”, which means that electricity supplies must be balanced across the whole region, else the lights will go out for everyone. The impact of this regional interdependence can be seen in a Kosovo-Serbia dispute that led to more electricity consumption than supply in the region, slowing electrical timers (clocks) across Europe. More seriously, earlier this year the failure of several transmission lines in Romania caused a serious disturbance to the continental European grid, requiring grid operators to disconnect customers in France and Italy to keep the system secure.[17] This security of continental European electricity supplies is therefore significantly more interdependent than for oil and gas.

The UK’s electricity grid, however, has a very different relationship with neighbouring markets. Whilst the UK is connected to the continent via four subsea electricity cables, it is not part of the continental “synchronous area”. This means that the electricity grids in the UK and on the continent can operate independently; potentially allowing one party to cut off the other in the event of an energy security crisis. The Brexit deal, the UK-EU Trade and Cooperation Agreement, requires both parties to cooperate on energy security including on emergency plans.[18] However, the agreement will only be fully tested in the event of an energy security crisis on one or both sides of the Channel. The UK and the EU would therefore be wise to prepare for scenarios where cross-border supplies of electricity are not available.[19]Finally, governments must develop truly resilient electricity systems similar to how, on the whole, they have developed resilient supplies of oil and gas. The first step to a resilient electricity system is recognising that things will go wrong, levelling with the public that some peoples’ lights will go out some of the time. The UK Government’s new Electricity System Restoration Standard is a good first step, codifying how quickly the Government expects the grid operator to restore supplies after a catastrophic failure of the grid; something that has thankfully never happened in the UK.[20]

Governments could go further by asking their regulators and grid operators to examine the potential to operate grids in smaller “islands” in the event of the transmission network failing. In the UK for example, could the electricity grid in Scotland or the South West of England operate independently from the rest of the UK in the event of the key transmission cables failing?

In addition, governments must develop more detailed and more targeted plans for how the electricity system will operate during a crisis. The UK’s Electricity Supply Emergency Code (EMSC) sets out how rolling blackouts (or ‘rota disconnections’) would be used to ration electricity in the case of prolonged shortages, whilst maintaining supplies for designated key services such as hospitals, railways and airports.[21] The transition to Net Zero means that emergency codes must keep up with rapidly changing definitions of key services. For example, chargepoints for electric vehicles increasingly provide a critical service, particularly as emergency and military vehicles are converted to electric.

Emergency codes must also keep up with new technologies that could allow a more targeted approach in the event of emergencies. Whilst electrification of the energy system creates risks in cyber security exposure, it also provides new tools for managing usage at a granular level. The UK’s current plan requires network companies to turn off parts of the electricity network, disconnecting customers for three hours at a time. This relatively crude process does not allow the network companies to keep the electricity flowing to individual households who might have critical needs, for example because they rely on a constant supply of electricity to power life-saving medical devices. However, new technology embedded in smart meters could allow network companies to keep some customers connected 24/7 if they can demonstrate a critical need.[22] Any proposals in this area would be hugely controversial but could help to protect vulnerable people during genuine emergencies.[23] By discussing these types of measures openly, governments can start broader discussions about energy resilience, including alternatives like providing incentives for households to install battery storage for backup if they live in areas with frequent electricity outages; any scheme could learn from similar programmes in the US States of Vermont and California.[24],[25]

Electrification makes energy security local

In many countries, the transition to Net Zero is well underway, and the path to a global economy that relies less on oil and gas is becoming clear. However, we will continue to rely on oil and gas for a long time, not least in critical industries like aviation and petroleum products, and for defence. Therefore, the new, more local risks to energy security posed by an increasing reliance on electricity must be managed alongside the traditional, global risks to oil and gas supplies. Even in a world with less oil and gas, countries will still have strong incentives to ensure stability in oil- and gas-producing regions, not least because of the potential for global trade in low-carbon hydrogen produced from either renewables or fossil fuels with carbon capture.

Hydrogen and hydrogen-derived fuels like ammonia are the big unknown in the world’s future energy mix. There’s significant uncertainty over how hydrogen will be used in our economies, how much countries will produce domestically from indigenous renewables or natural gas with carbon capture, and whether a global market for hydrogen could ever rival oil and gas.

Despite the inherent uncertainties over the future energy mix, it’s clear that governments must step up their work on energy security in the electricity sector, probing how their electricity systems could fail and how they can be made more resilient. Governments must also ensure that electrical infrastructure is not a poor relation to oil and gas infrastructure, where energy security mainly focuses. If governments can stay on top of these new risks then a resilient, Net Zero energy system is in reach. As an added bonus, countries that currently import oil and gas will instead rely more on domestic sources of renewable energy, potentially increasing resilience in the face of inevitable future energy security crises.

Ed Birkett is a Senior Research Fellow in Energy and Environment at Policy Exchange.

Notes

[1] ‘Net Zero’ refers to greenhouse gas emissions across an economy or for a company. For example, the UK Government has committed to Net Zero emissions across the UK by 2050. The “Net” in Net Zero refers to a balance between positive emissions (e.g. from burning fossil fuels) and negative emissions (e.g. from planting trees or capturing carbon dioxide from the air).

[2] BEIS (December 2020). Statutory security of supply report: 2020. Link

[3] BEIS (updated January 2020). Energy emergency planning: priority fuel allocation. Link

[4] The Guardian (March 2012). Panic-buying rumours fuel shortages, shutdowns and fights. Link

[5] International Energy Agency (IEA) (February 2021). Severe power cuts in Texas highlight energy security risks related to extreme weather events. Link

[6] CCC (December 2020). The Sixth Carbon Budget. Link. Page 72/73.

[7] Ofgem (January 2020). Ofgem opens investigation […] of the Western HVDC subsea cable. Link

[8] The Guardian (March 2017). All it took was an anchor… how a storm took down half the UK’s electricity link to France. Link

[9] Policy Exchange (December 2017). Undersea Cables: Indispensable, insecure. Link

[10] Policy Exchange (March 2021). Reform energy market to ensure supplies when it’s not windy. Link

[11] National Grid ESO (undated). Dynamic Containment. Link

[12] CCC (December 2020). The Sixth Carbon Budget. Link. Page 28 (Table 3).

[13] PG&E (undated). Public Safety Power Shutoff: Overview. Link

[14] The Guardian (February 2021). ‘California and Texas are warnings’: blackouts show US deeply unprepared for the climate crisis. Link

[15] Power Magazine (December 2016). France’s nuclear storm: many power plants down due to quality concerns. Link

[16] BEIS (July 2019). Panel of Technical Experts: Final report on National Grid’s Electricity Capacity Report. Link. Pages 13/14, paragraphs 41-45.

[17] ENTSOE (January 2021). System separation in the Continental Europe Synchronous Area on 08 January 2021 – update. Link

[18] Prime Minister’s Office (December 2020). Trade and Cooperation Agreement. Link. Pages 165/166. Articles ENER.17 and ENER.18.

[19] For more on post-Brexit energy relations, see Policy Exchange (September 2020), The Future of UK-EU Energy Cooperation. Link.

[20] BEIS (April 2021). Introducing a new ‘Electricity System Restoration Standard’: policy statement. Link

[21] BEIS (Updated November 2019). Electricity Supply Emergency Code (revised November 2019). Link

[22] Energy Institute at Haas (September 2020). Smart meter, dumb blackouts? Link

[23] This is Money (September 2020). Government mulls emergency measures that would enable networks to SWITCH OFF your electricity without warning or compensation. Link

[24] Green Mountain Power (May 2020). Vermont regulators approve pioneering GMP energy storage programs to save customers money and improve reliability. Link

[25] Greentech Media (September 2019). California supercharges battery incentive for wildfire-vulnerable homes. Link