Energy demand and energy security
Chapter 6: Richard Hoggett, Nick Eyre
and Malcolm Keay
Two big questions
1 Why the focus on supply security?
2 How does energy efficiency fit in?
Security is about the balance of supply
and demand
Mismatches are symmetrical causes
Too little supply
Too much demand
Balancing
mechanism failure
Too much supply
Too little demand
Potential responses are also
symmetrical
Balance can be restored:
• By increasing supply/reducing demand
• By reducing supply/increasing demand
• By fixing the balancing mechanism (markets,
delivery infrastructure etc)
So why the focus on supply?
• Top left part of matrix (supply<demand) has
been main focus of concern (eg statutory
security “of supply” document).
• Mainly due to supply side bias – demand side
treated as a given (consumers must have
access to “the services they need”); security
therefore taken as ensuring enough supply to
meet that demand.
• Balancing mechanisms often ignored (though
they are the usual suspect in a crisis).
But there are some asymmetries
Disruptions have been more common on supply
side (they can happen on demand side but
have been constrained or predictable).
Some further (recursive*) asymmetries:
• Most of our information relates to supply side
• Value of lost load (VOLL) much higher than
cost of supply
(*both are effect as well as cause)
Asymmetries 2: responses
• Supply side has large scale response mechanisms
• Responses on demand-side (diversity, storage,
redundancy) may be (regarded as) trickier to
mobilise
But:
• Governments have a legal responsibility to have the
capacity to reduce oil demand by 10% (IEP)
• In practice, this has often been achieved or exceeded
(IEA 2011b)
In any event, the future balance
will be different
• Growing supply side inflexibility (non-dispatchable
and capital intensive low carbon plant; gas imports)
• Growing demand side flexibility (smart grids, smart
meters etc)
• Growing demand side complexity (uncertain trend of
demand; new demands – EVs and dg; policy driven
demands; gas/power interactions)
• Rising cost of energy (greater incentives for demand
side – VOLL relatively lower)
UK Sources of Power Generation 2009 – Daily
(3.8 GW Wind Capacity)
1,200
1,000
800
Wind
GWh/day
Gas
hydro
600
Pumped Storage
Oil & OCGT
Imports
Coal
400
Nuclear
200
1
13
25
37
49
61
73
85
97
109
121
133
145
157
169
181
193
205
217
229
241
253
265
277
289
301
313
325
337
349
361
0
Sources: National Grid, Own Analysis
UK Sources of Power Generation 2025 Daily
43.2 GW Wind Capacity
(OIES)
1,200
1,000
800
Wind
GWh/day
Gas
hydro
600
Pumped Storage
Oil & OCGT
Imports
Coal
400
Nuclear
200
1
13
25
37
49
61
73
85
97
109
121
133
145
157
169
181
193
205
217
229
241
253
265
277
289
301
313
325
337
349
361
0
Sources: National Grid, Own Analysis
2025 Hourly Analysis
Days 121 – 127
(OIES)
Days 241 – 247
45,000
40,000
40,000
35,000
35,000
30,000
30,000
Wind
25,000
Wind
hydro
Pumped Storage
20,000
Oil & OCGT
Gas
MWh/hour
MWh/hour
Gas
25,000
hydro
Pumped Storage
Oil & OCGT
20,000
Imports
15,000
Imports
Coal
Nuclear
Coal
15,000
Nuclear
Demand
Demand
10,000
10,000
5,000
5,000
0
Sources: National Grid, Own Analysis
2905
2909
2913
2917
2921
2925
2929
2933
2937
2941
2945
2949
2953
2957
2961
2965
2969
2973
2977
2981
2985
2989
2993
2997
3001
3005
3009
3013
3017
3021
3025
3029
3033
3037
3041
3045
3049
5785
5789
5793
5797
5801
5805
5809
5813
5817
5821
5825
5829
5833
5837
5841
5845
5849
5853
5857
5861
5865
5869
5873
5877
5881
5885
5889
5893
5897
5901
5905
5909
5913
5917
5921
5925
5929
0
Balancing in Spain
Two
days
in
Spain
Electricity demand may well have
peaked last decade (as may oil, gas
etc)…..
• Extended recession – lost decade(s) for
Europe
• Energy efficiency (government policies plus
AEEI)
• Higher electricity prices (global fossil prices
plus cost of decarbonisation)
• “Negative demand” (small scale solar, CHP etc)
Demand: composition more
significant than level but dependent on policy
(National Grid scenarios)
The policy discussion revolves
around energy efficiency
“Energy efficiency is the most cost effective way to reduce
emissions [and] improve energy security ….. [It] can be seen
as Europe's biggest energy resource”
(Commission – Energy 2020)
“Energy efficiency must be the starting point [for increased
energy security]” (Malcolm Wicks]
Energy efficiency is one of the “six pillars” in the Government’s
latest security of supply document
But energy efficiency is about
reducing inputs, not service outputs
• Energy efficiency means less energy for same
amount of services
• Doesn’t reduce dependence on energy
services - except where non-energy services
substituted (eg cycling)
• Dependence not represented by GDP share of
energy or energy imports as in many policy
docusments
• Greater efficiency = higher value energy (ie
the pain of loss is greater; VOLL is higher)
Efficient A vs inefficient B
• A and B use the same amount of energy services. A
is more efficient and spends 3% of GDP; B 5%.
• With a given %age supply reduction, both lose the
same %age energy services
• With a given quantity reduction A loses more
services
• B likely to be able to reduce demand more quickly
and cheaply in an emergency because of inefficiency
• B also more likely to have greater diversity of supply
and infrastructure because of higher energy flows
On the other hand
• B pays more for energy and suffers more from
higher prices (but always did)
• B has a bigger gap to fill in an emergency (so
…?)
• A may have better “buffers” (like insulation)
• A may have greater consumer awareness and
responsiveness
• A may be less exposed to imports and fossil
fuels in general
Role of energy efficiency
• Effects complex – no straightforward link with
security
• Efficiency should not be considered in
isolation or in an undifferentiated fashion; it’s
the system effects of particular forms of
efficiency that count
• Need wider strategy for informing and
empowering consumers
Conclusions
• Demand has received too little attention in relation
to security in the past, though demand reduction has
been important
• Energy efficiency has been treated too simplistically
• In future, the demand side will take on a much
greater potential role as energy markets decarbonise
• Governments will need to develop a coherent and
integrated strategy to harness this potential
effectively and need to pay attention to the
balancing mechanisms that link demand and supply