Energy security is an issue of increasing political concern around the world, driven by surging demand for energy; sharply rising international prices for fuel, heat and electricity; increasing dependency on energy imports in most regions of the world; and, an emerging sense of vulnerability from the natural and malicious threats tied to climate change and terrorism. Many governments are struggling to address the problem of energy security in their policies.
One solution that deserves a higher place on the agendas of decision makers trying to grapple with the problem is decentralized energy (DE). DE includes a broad portfolio of energy technologies which share one thing in common: they all generate electricity close to where it is needed. DE is defined as: electricity production at or near the point of use, irrespective of size, technology or fuel used both off-grid and on-grid. It can include, on-site renewable energy, high efficiency cogeneration or combined heat and power (CHP) and industrial energy recycling and on-site power. Evidence shows that one of the best ways of reducing risk to fuel supply interruptions and energy infrastructure failure is by investing in DE.
The recent convergence of several factors has placed the issue of energy, especially energy security, near the top of the agendas of most regions of the world. Arguably energy has not enjoyed such a prominent spot in international debates since the first energy crisis of the 1970s. The main factors once again pushing the issue into the spotlight include:
Record energy demand
Demand for energy commodities and services has never been higher see Figure 1. According to the EIA 2007 World Energy Outlook, total world demand for primary energy was 446.7 quadrillion Btu in 2004 and this is expected to increase to 607.0 by 2020. The apparent insatiable thirst for energy in OECD countries continues its upward march unquenched, even as new demand in important emerging economies such as India and China grows exponentially. Demand for all energy fuels and technologies is expected to grow.
Figure 1. Total historic global energy consumption by source (quadrillion Btu). Source: WADE based on the US Energy Information Administration, International Energy Annual 2005
Prices are at record highs for oil, gas, uranium and many other energy commodities and services. The upward price pressure is partially due to tighter supplies, but also due to generally increased demand coupled with fiercer international competition for scarce resources. Analysts expect prices for all fuels to continue to rise, with only the prices of emerging decentralized technologies such as solar and fuel cells to fall as economies of scale are reached.
High dependency on energy imports
Increasing dependencies on energy imports to meet local demand are being witnessed in most of the world’s biggest energy consuming countries almost universally in OECD countries; see Figure 2. For example, the EU as whole is expected to be dep-endent on imports for 75% of its natural gas requirements by 2020.
Figure 2. Net annual natural gas import dependence for select nations over time (billion cubic feet). Source: WADE 2007
Emergence of environmental drivers
The public is increasingly demanding a clean environment from its public and private sector leaders. A company’s or politician’s track record in reducing pollution, including climate-destabilizing greenhouse gases, is more and more an indicator of how they will succeed and pollution in the power sector is often seen as contributing to energy insecurity. Nuclear is perhaps the most obvious example as it raises many questions in terms of contamination from used waste and concerns over malicious use of nuclear materials. All centralized generation technologies, however, raise security concerns.
Climate change, for example, exacerbates energy insecurity while at the same time the current highly inefficient centralized energy system use aggravates climate change. Weather is by far the most common cause of power outages. Around the world minor power interruptions resulting from storms and routine weather are a daily event. Winds knocking trees or branches in to power lines, rains eroding the foundation from under power lines, freezing rain and snow weighing down power lines and heat causing cables to overheat thereby increasing power losses are just some examples of phenomena that cause sporadic and unreliable energy availability.
It is extreme weather, however, such as heat waves or hurricanes, that is most likely to cause power interruptions. Climate-polluting greenhouse gases are the main culprit. These interrelationships between energy security and environmental security are increasingly driving decision makers.
All the above factors have the cumulative affect of increasing the collective sense of insecurity especially as it relates to energy. Unsurprisingly, increased competition for scarce energy resources is exacerbating existing geopolitical tensions and catalyzing new conflicts. Prominent conflicts around the world are often traced directly or indirectly to energy.
Energy security has thus reemerged on the international political agenda. To say it has done so with a vengeance is, sadly, more than just a colourful phrase. Energy insecurity issues can be roughly divided into two distinct yet interrelated types of vulnerability: the threat of energy/fuel supply interruptions and the threat of energy infrastructure failure. Even a cursory examination of these two types of threat quickly reveals the significance of the issue and why energy insecurity is a problem to which increasing numbers of politicians are turning their attentions.
Supply vulnerability refers to interruptions in the supply of fuel, electricity, heat etc. In cases where interruptions are caused by physical acts on pipes or electricity wires such interruptions share much in common with infrastructure failure discussed in the next section. Not all supply interruption need be physical in nature however. Supply interruptions can be as a result of scarcity due to high demand, temporal interruptions, economic sanctions from main fuel exporting countries or simply being outbid by a competitor for the resource. Threats of this type tend to be trans-jurisdictional in scope and include things such as:
Domestic or inter-national labour strikes are one example of how the power sector is susceptible to energy price volatility. Striking oil workers in Venezuela in 2002 had a global impact on oil prices with noticeable upward trends in petroleum products as a result of tightened international supplies. Striking workers at power stations could result in similar interruptions of electricity. In 2007 striking South African coal workers put the nation’s power supply (based on centralized coal plants) at risk.
Economically motivated supply interruptions
Various examples exist where energy supplies are interrupted either because the exporting nation, upon which a region is dependent for supplies, is offered a higher bidder or is unable to meet contracts for reasons outside its control. Of course the creation of OPEC in 1960 is the most obvious example of economically motivated manipulation of energy supplies, but there are also important contemporary examples. In 2006 Chile had the misfortune of experiencing gas supply interruptions when Argentina slowed export in order to meet domestic demand. Chile, whose power sector is largely dependent on Argentinean gas, was thereby forced to re-evaluate the security of its energy supply and has since passed a new energy law in response. A similar example in early 2006 continues to haunt western Europe. A price dispute resulted in Russia shutting down gas supplies to the Ukraine, thereby interrupting supplies to the western European countries dependent on Russian gas (because western European imports pass through Ukraine en route from Russia).
Although in both these cases disruptions were not as serious as they could have been, they nevertheless underscore the vulnerabilities resultant from supply disruptions and highlight the strategic advantages of increasing use of domestic resources.
Although a contentious issue and often difficult to prove, energy blackmail is another example of supply interruption risk. At a multilateral level various examples exist of economic sanctions affecting energy imports being levied against specific target countries. Unilaterally examples exist of those with political power denying electricity and other vital energy services within their own jurisdiction for political purposes.
Critical infrastructure vulnerability
The more obvious pillar of energy security is that of the vulnerability of physical infrastructure. Infrastructure failure can be as a result of deliberate interruptions such as sabotage or terrorism, misuse of infrastructure, natural decay resulting from outdated equipment, natural disasters, evolving climate and day-to-day weather.
A multitude of natural phenomena threaten infrastructure, from storms and floods to droughts and earthquakes. In 2003 an earthquake knocked out a 1000 MW gas-fired plant, and resulted in major blackouts in California. In the summer of 2005 a heat wave in France caused several major nuclear generating plants to be forced off-line due to chronic water shortages. Indeed there are many examples of water shortages resulting in insufficient supplies to fill hydro-power reservoirs or cool large thermal power stations. In 1999 freezing rain caused power interruptions for weeks in eastern Canada and great discomfort was caused as temperatures plunged. Grid infrastructure simply collapsed under the weight of the ice. The 2003 blackout in the United States, caused by a branch falling on a wire thousands of kilometres away, resulted, among other things, in 145 million gallons of raw sewage being released from a Manhattan pumping station into the East River. Hurricane Katrina knocked out a third of US refining capacity, which resulted in domestic US fuel reserves being drawn upon and corresponding upward motion for energy prices around the world.
Although none of the above examples can be tied indisputably to climate change, because climate change will lead to more and more such events these examples nevertheless illustrate how a changing climate will impact energy infrastructure. The consensus in the scientific community is that these types of climate related interruptions of the energy economy are likely to increase both in frequency and in severity.
Simple natural decay such as rust and corrosion of wires and other energy infrastructure is, however, perhaps the biggest threat to infrastructure failure. Damage from natural causes notwithstanding, the IEA expects that US $6.1 trillion will be required in power sector investment alone between now and 2020.
A centralized power system, with major plants in prominent locations, and key infrastructure easily catalogued on a piece of paper, make for much more convenient targets for military, guerillas and terrorists than a highly decentralized network of generators. Large power stations and transmission infrastructure are among the first targets in military conflicts and are extremely vulnerable to attacks. Experts have identified energy infrastructure as the second most critical form of network for the safe functioning of society after only communication infrastructure.
Disrupting power infrastructure can also be a means of displacing other trade, for example power shortages in Iraq have resulted in reduced oil production, and attacks on gas infrastructure in Mexico have resulted in major industries being shut down. Confirmed cases of attacks on energy infrastructure were reported recently in countries as diverse as Canada, Iraq, Pakistan, Mexico, Nigeria, Ukraine and China.
There are various emerging dimensions to the issue of energy security including specialized weapons designed for attacking the grid or virtual attacks being co-ordinated from distant computers. ‘Graphite bombs’, ‘blackout bombs’, ‘e-bombs’ ‘high power microwaves bombs’ (HPM e-bombs), flux compression generator bombs (FCGs), and nuclear e-bombs, are a few of the more frightening new words in the vocabulary of the malicious individual. Although the weapons in this arsenal are specifically designed to damage electrical infrastructure not people their use nevertheless poses very serious risk to health as critical services such as medical services, communications, water and sanitation, and so on would be imperiled.
For some individuals the potential danger of ‘cyber threats’ is hard to imagine. Virtual threats, however, too often translate into physical damage. In 2007, Russian hackers shut down overnight the economy of neighbouring Estonia using a carefully designed and orchestrated cyber attack. The attacks shut down the major newspaper, electronic banking and automatic tellers as well as the internet. Although the electricity infrastructure was not targeted in this attack, it shows how a co-ordinated attack, in this case allegedly the work of ‘volunteer pranksters’, can have very real effects.
In 2006 another, even more frightening, example emerged when a single US security expert, in an experiment designed to test US infrastructure susceptibility to internet threats, in a few hours successfully hacked into the control room of a major US nuclear power plant and seized control of the reactor core cooling.
Improving energy security via DE
Given the danger imposed by the threats such as those outlined above it makes sense that decision makers explore all the options at their disposal for improving energy security. DE can increase the energy security outlook of the regions in which it is employed, both in terms of reduced infrastructure vulnerability and reduced fuel import dependence. Furthermore, DE provides the best way of improving energy security at the lowest cost. A fixed investment in DE will go much farther in making the energy systems more resilient than a similar investment in either exploring for new energy supplies or military forces to help secure existing foreign supplies.
DE for reduced supply vulnerability
DE greatly reduces a region’s dependence on foreign supplies for a diversity of reasons.
Reduced import dependence via efficiency
Centralized electricity plants, depending on the fuel and technology employed, are between 30% and 50% efficient meaning that they waste between half and two thirds of the energy in each unit of fuel. Decentralized plants on the other hand, because they are sited near to where the electricity is used, can make use of the heat that is a natural product of combustion. Because DE plants can reach 90% efficiency, areas that rely on them require significantly less fuel to provide the same energy services. By investing on a large scale in decentralized energy technologies a jurisdiction can therefore reduce significantly its reliance on fuel imports (see box on Azerbaijan).
If an area is 100% reliant on imports for its energy, a 25% increase in efficiency translates directly into 25% less fuel that needs to be imported. Improved efficiency of fossil-fired DE can thus make a very significant contribution to alleviating vulnerability from interruptions in fuel import delivery chains. DE technologies based on domestic fuels such as biomass, solar or wind reduce dependence on foreign supplies even more.
Improved supply security by closely matching demand
Large nuclear, coal and hydro-power plants, by their very nature, require longer construction lead times because more stakeholders must be involved, they have larger impacts on the local area and there are more unforeseen contingencies. Lead times of 1020 years or longer are typical. As a result central plants are seen as lumpy investment and they are not very well suited for meeting demand as it grows. DE on the other hand, because of its modular nature, is much more flexible and can meet changing demands very closely being deployed in a matter of weeks or months rather than years (see Figure 3).
Figure 3. Two-fold benefits of decentralized energy Source: WADE
This means that the danger of rolling blackouts or brownouts due to supply shortages can be avoided with DE. Capacity can simply be deployed as demand grows (or indeed, unlike central plants, be easily taken down or moved due to its prepackaged nature). With DE the problem of grossly overshooting demand and being stuck with a sunken asset for which there is no demand is also avoided. DE assets in other words start translating into generous returns immediately compared to central plants where costs build up for years before the first kWh is generated.
Many examples exist of DE stepping up to fill demand gaps when central plants fail. Capacity shortages from construction delays of the Comanche Peaks nuclear plant in Texas were met by contracting several CHP facilities to provide firm capacity in the meantime.
DE for reduced vulnerability to infrastructure failure
Investing in DE capacity greatly improves the ability of the grid to withstand accidents, extreme weather and even co-ordinated attacks.
Reduced downtime and need for reserve capacity
A misplaced bolt found inside the generator at Koeberg nuclear power plant in South Africa in December 2005 required the replacement of much of the generator. However, long lead times for repairing the 900 MW unit (including difficulty finding spare parts), meant the incident resulted in rolling blackouts for much of 2006 until it was repaired in May. A system based on a diverse portfolio of smaller DE units is much less vulnerable to this type of supply interruption. As the case of Azerbaijan illustrates (see box) a nation can get more power, faster, by investing in DE rather than conventional centralized plants.
DE has the added advantage of being more politically palatable (both internationally and within each nation consider for example international concerns over Iran’s nuclear programme) because there are no public concerns surrounding safety, waste disposal or weapons proliferation. A shift to more DE on the grid reduces the relative importance of any single piece of grid infrastructure in supplying reliable power, because power is being generated on both sides of it.
Islands of reliability
The benefit of the decentralized model in terms of resistance to natural disasters can be illustrated by a multitude of case studies. Wherever DE is employed experience shows that it remains operational during natural disasters. DE allows critical services such as police, fire service and health centres to remain operational during hurricanes and storms. Factories that have invested in DE enjoy an advantage over their competitors because they can remain fully operational during blackouts. Successful entrepreneurs in regions with infamously unreliable grids, such as India or China, stay ahead of the competition by investing in on-site or ‘captive’ power.
More resilient to attack
A follow-up study after the 11 September attacks, suggested that ‘systems based more on gas-fired distributed generation plants may be up to five times less sensitive to the effects of systematic attack’ than central power systems. Iraq’s leading power sector experts, in reference to efforts to rebuild Iraq’s power sector after the US offensive, said: ‘Had the bulk of the funds allocated for electricity works been devoted to installing smaller plants dispersed nearer load centres, full load demand could well have been met.’
One reason identified for DE’s improved resilience to attack was that failure of DE systems can be brought back on-line much faster than systems heavily reliant on a single generator. Also the impacts of a single physical attack on a central power plant, could have a much more widespread impact. In order to cause similar havoc on a system based largely on the decentralized model, a co-ordinated attack on hundreds or thousands of individual plants would be required.
Cyber attacks too would prove comparatively ineffective to a decentralized network. As explained above, shutting down a single multi-GW capacity coal, nuclear or hydro plant would affect millions of people. With a system of hundreds of smaller plants supplying the same people, hundreds of security systems of varying sophistication would have to be breached in tandem a far more unlikely, and labour intensive possibility. This is to say nothing of the possible disastrous consequences of a successful attack on a nuclear power plant risks that need not come into the equation in the case of distributed generation. Various empirical studies have concluded that DE is a safer approach to central generation.
An additional security benefit of DE is that smaller units are less susceptible to fuel spread risk compared with larger thermal plants. For example, as the cost of gas increases, decentralized generators show a considerable economic advantage over large-scale power-only gas plants as spark spreads widen. As demand increases around the world for clean technology, market forces will put even greater pressure on investors to opt for CHP because of the efficiency gains it offers. The public will demand CHP over CCGT as a better understanding of energy issues seeps into the general consciousness.
Local gas distribution companies can further reduce risk because most gas-fired on-site power projects flow through their meter, whereas larger gas power-generation projects (such as CCGT plants) flow through the meters of gas wholesalers. This means that by investing in DE, gas companies will be able to enter strategic new markets, while improving the security of general gas use.
As competition increases for increasingly scarce energy resources the importance of security is bound to increase. Decentralized energy technologies, including fuel cells, microturbines, reciprocating engines large and small, gas turbines large and small, plug-in hybrid vehicles, photovoltaics, on-site wind, biogas digesters and a host of other technologies offer enormous security benefits. By reducing a region’s vulnerability to energy supply interruptions and threats to critical electricity infrastructure, both natural and human, DE can offer great comfort at a low comparative cost. DE is a practical way of mitigating risks associated with energy and climate insecurity while simultaneously allowing communities to adapt to energy interruptions from disrupted supply chains and damaged infrastructure alike. As the cultural and natural climate of the earth continue to change in the coming decades DE is the logical means of ensuring safe, secure energy to people from around the world.
Jeff Bell is Program Director with the World Alliance for Decentralized Energy (WADE), and is based in Edmonton, Alberta, Canada.
Azerbaijan five plants instead of one
In 2005, upon examining the various options available to meet the anticipated demand, the government of Azerbaijan decided that a decentralized energy infrastructure was better able to meet requirements that building a large centralized power plant. It was therefore decided that five smaller plants would be built in strategic locations of high energy demand. Each plant was to be composed of 10 identical 9 MW gas engines making for a total addition of 5 x 10 x 9 or 450 MW. Because the plants were sited where the power was needed, no additional transmission capacity was required. And because power did not have to be moved large distances across the grid, 16% less generation capacity could be built in order to meet the same demand (i.e. additional power did not have to be generated to make up for grid losses).
In February 2006, just 10 months after the original order was placed, the first of the five plants was up and running. Now all five of the plants are in operation, producing reliable electricity where it is needed. Furthermore, in three of the locations waste heat is being captured in the wintertime to heat greenhouses in order to produce value-added crops for export (a technique pioneered in the Netherlands). Using the power plants in such cogeneration applications greatly improves the fuel efficiency reducing the need for additional fuel imports. Currently the Azerbaijan engineers are looking at more ways to use waste heat at the remaining plants. The project has been so successful that a sixth and seventh plant have been commissioned which plan to make further use of waste heat using absorption chillers for cooling in the summer time and heating of greenhouses in the winter.
The decentralized model being employed in Azerbaijan has a multiplicity of security benefits. Data is not yet available on total fuel savings resultant from the approach, but using the conservative estimate that fuel efficiency has been improved by 25% would translate into 25% less gas that would have to imported for power generation, increasing significantly the bargaining power of Azerbaijan with the countries on which it relies for gas. Reduced imports also translated into significant economic savings and allowed scarce budgetary resources to be allocated elsewhere. Capital cost savings were also realized via the elimination of both the need to build extra capacity to meet peak demand and additional new grid capacity to move power to end users.
In addition, the vulnerability of Azerbaijan’s power system to deliberate attack or natural disaster has been reduced considerably. In order for Azerbaijan to lose even 50 MW all ten engines at one of the plants would have to fail at once. In order for a larger act of sabotage to be effective terrorists would have to co-ordinate five simultaneous attacks and each attack would have to be successful perhaps not impossible but considerably more challenging than targeting a single, larger, plant. Robustness of the system is similarly improved from a perspective of natural disasters and water shortages (which make cooling difficult).