Significance of Diversification of Energy Resources Reza Amrollahi In the Name of God.

Significance of Diversification of Energy Resources

Reza Amrollahi

In the Name of God

Outline• Energy Production and Its Perspectives• Definition of Security and Its Categories• Security & Disruption in Energy Supply• Types of Energy Production Risks• Diversification & Security in Energy

Supply • Energy Production Factors

– Energy Diversification Factor– Energy Supply Risk Factor

• Solutions• Summing Up

Energy & Its Perspectives• World population would reach 8.2 billion in

2030, from 6 billion in 2000.• One third of the world population have no

access to electricity and another one third have only limited access.

• If the per capita energy usages in the developing and developed states are to be the same then the energy demand would increase 8 fold till 2050.

• In 2030 70% of total energy demand would form in developing countries.

• Therefore, the energy exchange trade (production, demand, supply, transport) would significantly grow.

In 2030:• Still more than 1.4 billion people have no

electricity.• Natural gas would rapidly replace other

energy resources.• Growth in natural gas usage would be limited

by advances in other energy technologies.• Flower-house emissions would increase

steeply.Conclusion:

Stability of states in near future depends primarily on their capability to produce clean and enough secure energy.

Energy & Its Perspectives

• Security can be relatively defined as:

Getting Free of Risks, Survival,

and Preservation of Basic Values

• Security is the fundamental concern for all states from military and non-military aspects.

• Non-military aspects can be divided into different categories, including Energy Production, Economic, and Environmental issues.

Definition of Security

Security and Disruption• Energy Supply and Risking Factors

Technological Limitations

Major Dependence on One or Few Technologies

for Energy Production

Geographic Limitations

Major Dependence on One or Few Countries

for Energy Imports

Energy Supply

Risk

Security and Disruption• Energy production security similar to security

itself, covers a vast and diverse concept.• Countries with major reliance on limited

energy supplies and import them would be more vulnerable to risks.

• Instabilities in energy supply and demand, technological, or geographical limitations can lead to disruptions in energy market.

• Energy importing countries usually do not face political chaos, but they are threatened by market disruptions (e.g. developed states).

Security and DisruptionOn the other hand, developing countries usually experience all three types of disruptions:

1. Disruptions Because of Political Issues: Due to Inability of Exporting Country, Internal Political Problems (Internal Chaos, Post-war Issues, etc.), External Problems, and Group Decisions of Unions,

2. Disruptions in Markets: Due to, for instance, Embargos,

3. Disruptions Due to Accidents: Natural Disasters, with no humans playing role.

Types of Energy Supply Risks

Effective Risks in Energy Supply

Non-diversifiable Risks

Diversifiable Risks

Problems in the Global Market

Problems in the Local Markets

Problems in Access to Technologies

Types of Energy Supply RisksNon-diversifiable Risks:

• Correspond to oscillations in the global market and affect a large number of producers and consumers in countries.

Diversifiable Risks:

• Correspond to those risks, against which a country can increase the security factor by taking proper policies and programs.

Diversification & Security• According to IEA, in 2030 fossil fuels would

produce about 89% of world’s energy with the current rate.

• This will be 2% above the corresponding figure at the beginning of the current century.

• At present, major available energy resources are:– Oil– Coal– Natural Gas– Nuclear Energy– Hydro-power

Diversification & Security• Share of various energy resources in the world

(Source: IEA)

Energy Production Factors• For a quantitative rather than a

qualitative measurements we define two energy production factors.

Qualitative Evaluation

Quantitative Evaluation

1. Comparison to Other States

2. Position of Technology

Stability & Reliability in Energy Production

EnergySecurityFactor

Usage of Various

Technologies& Resources

EnergyDiversification

Factor

Energy Diversification FactorPrimary Energy Supply in Various Countries

(Million Ton Crude Oil)Country 1999 2000 2001 2002

USJapan

FranceCanada

South KoreaIndiaIran

IndonesiaSaudi Arabia

Turkey

2242.3516.4255.1244.4178.5502.1121.7140.690.171.0

2302.6521.6257.6350.9190.9523.6

125.00146.1105.377.5

2253.9517

266.4248.2193.9524.2134.5149.6119.771.6

2290.4516.9265.9350.0203.5538.3143

156.1126.475.4

Total World 9711.6 9963.5 10150.1 10376.4

Energy Diversification FactorPercentage of Primary Commercial Energy

Supply (Based on 2003 Statistics)

Country Hydro-

power

Nuclear

Energy

Coal Natural Gas

Oil

USJapan

FranceCanada

South KoreaIndiaIran

IndonesiaSaudi Arabia

Turkey

2.64.56.5

23.50.74.51.52.1__1.7

7.910.338.35.7

13.81.1________

24.922.24.7

10.624.153.60.5

17.6__

20.8

26.613.615.127.011.47.8

56.029.945.125.4

39.749.236.133.049.832.841.850.354.942.9

Energy Diversification Factor• To measure the diversification of various

energy resources we define the energy diversification factor d as:

Here:• N is the number of energy resources,

• xi is the percentage of the ith energy in the country’s supply.

N

i

i

N

xNd

1

1

100

Energy Diversification FactorCalculated Diversification Factors for Countries

Country Energy Diversification Factor

USJapan

FranceCanada

South KoreaIndiaIran

IndonesiaSaudi Arabia

Turkey

3.03.13.42.33.44.65.74.06.02.9

Energy Diversification Factor• Canada with the smallest and Saudi Arabia

with the largest diversification factors have respectively the most even and most uneven usage of energy resources.

• Iran has a close d-factor to that of Saudi Arabia, showing its unreasonable situation.

• Some states essentially have no capacity to produce some forms of energy, e.g. hydro-power in Saudi Arabia.

• Hence, diversification in energy production schemes should be of the primary concern for Iran.

Energy Supply Risk Factor• From the energy supply security side,

we can take quantitative measures too.• Energy supply risk factors are given

relative to crude oil for Japan as– Liquid Natural Gas: 1.94– Crude Oil: 1.00– Coal: 0.317– Nuclear Power: 0.026

• Unexpectedly, the risk factor for nuclear energy (in Japan) is much lower than other forms, being 75 times less than LNG.

Jap. J. Political Sci. 5, 1 (2004)

Energy Supply Risk Factor• This remarkable difference can be due

to Japan’s access to nuclear fuel cycle.• Therefore inability to access the

peaceful nuclear fuel cycle will be a direct cause for increasing nuclear energy’s risk factor.

• Of course, there are numerous political, regional, and global issues affecting this situation.

• In fact a precise evaluation of risk factors for every country requires a separate and detailed research.

Energy Supply Risk Factor• If we take zero risk factor for Hydro-

power and equal factors for LNG and natural gas, then we can define the total energy supply risk factor e as

where ri is the risk factor of ith energy.

N

iii xre

1100

1

Energy Supply Risk FactorCalculated Energy Supply Risk Factors

Country Energy Supply Risk Factor

USJapan

FranceCanada

South KoreaIndiaIran

IndonesiaSaudi Arabia

Turkey

0.990.830.670.890.800.641.511.141.430.99

Energy Supply Risk Factor• India and France have the smallest energy supply risk

factors:Cause:– Major reliance respectively on nuclear and coal energies (low

risk resources).

• Iran and Saudi Arabia have the largest energy supply risk factors.Cause:– Heavy reliance on high risk energy resources (fossil fuels).

Although the geographical and local benefits of these two countries are not included in this estimation, however, several compensating issues should be considered in the long term as follows in the next pages.

Energy Supply Risk Factor• Iran has huge natural gas reservoirs, but this would

not help to attain a more reasonable energy supply risk factor:

Pressure drop in many oil fields andthe necessacity of

gas reinjection

Very low internal prices, encouraging

unreasonable consumption

Heavy subsidies paid, encouraging

Illegal trade

Global limitations inusage of fossil fuelsdue to flower-house

emissions

Limitations in Long-term Usage of Natural Gas

• In general, countries having large energy diversification factors (i.e., uneven usage of resources), have large energy supply risk factors too. In both cases Iran has almost the worst situation.

• There are three inter-related solutions for Iran:

1. Diversification of Energy Resources

2. Development of Low Risk Technologies

(Coal, Hydro-power, and Nuclear Power)

3. Maximum Utilization of Renewable Energies

Solutions

SolutionsHydro-power:• Iran has not yet fully developed its hydro-

power capacities. Through the completion of existing projects, the share of this clean energy form would increase.

• Within 9 months the total installed capacity of hydro-power plants would exceed 6007MW, which constitutes 18% of total country’s electricity.

• After completion of current projects during the next twenty years, the total capacity of hydro-power plants in Iran would reach 11,584.4MW.

Solutions•Karon-3 Dam

Solutions• Jiroft Dam (Illustration of Spillway)

SolutionsNatural Gas:• Currently, European Union is considering Iran

as the best alternative for Russia to import natural gas.

• From another point of view, exports of national reservoirs such as natural gas and oil, in their crude form, results in destruction of many economic potentials as well as very low surplus benefits.

• Perhaps the best way to deal with this, is to keep the exports and therefore exchange with money to minimum, and replace it with the imports of science and technology, in the infra-structures of energy production with high efficiency, nuclear energy, renewables, and collaboration in the nuclear fusion research.

Solutions

SolutionsCoal:• Current estimations show that only 50% of the

country’s coal can be used for total required electricity over the next 30 years.

• Iran’s Electricity Development Organization has the first coal plant with the Clean Coal Technology in Tabas, close to the Mazino coal mines.

• If the share of coal from the total energy supply is one-third of the current total value, then internal coal mines would last for about a century.

SolutionsNuclear Power:• Atomic Energy Organization of Iran initially

planned in 1977 for a minimum of 9000MW and maximum 19800MW nuclear power according to country needs and consultation with Stanford Research Institute.

• 2x1200MW reactors in Bushehr and 1800MW plants in Ahwaz were planned.

• After the revolution, contracts were unfortunately stopped. However Bushehr plants would be ready for operation at reduced capacity in 2 years.

SolutionsBushehr reactors under construction

Solutions• With the completion of Iran’s hydro-power

projects within the current year, energy diversification and supply risk factors would improve to 4.3 and 1.29, respectively, which show a much more favorable situation.

• Completion of Bushehr nuclear plants, Tabas coal plants, and all remaining hydro-power projects should be done in about 15 years. In this case, the energy diversification and supply risk factors would reach 3.5 and 1.09, respectively, which represent a situation quite comparable to developed states.

Solutions

Current Status of Energy Factors and Their Expected Values in Future

• For comparison, the Energy Diversification and Supply factors respectively for France and the United States are 3.4 and 0.99.

Factor Current Value

Mid-2006 2020

Diversification d-Factor

5.7 4.3 3.5

Supply e-Factor

1.51 1.29 1.09

Solutions• Renewable energies require heavy initial

investment and small energy production capacitites, which limit their usefulness.

• Considering all political aspects and the serious enviornmental issues involved with nuclear fission, the best remaining choice for energy production is the peaceful and clean NUCLEAR FUSION technology.

Breaking heavy nuclei

Attaching light nuclei

NuclearFission

NuclearFusion

NuclearPower

Summing Up• Not only diversification in energy resources of

developing countries has direct relationship to their energy supply security, but also it is a condition for sustained development as well.

• Developed countries with stable economies enjoy favorable diversified energy production among various resources and rely on low-risk energies.

• Nuclear energy, contrary to the serious political difficulties during the construction have never been, at least up to now, affected by external problems after operation.

Summing Up• From both energy diversification and

supply security views, there is a one-to-one correspondence. In general countries with large d-factors (less diversified) have large e-factors (less reliable situation) too.

• In both cases Iran is the most critical state.

• Through completion of hydro-power, coal, and nuclear projects, Iran’s energy factors would come close to the figures for developed countries.

Thank You for Your Attention