3 Intelligent Well Technology: Status and Opportunities for Developing Marginal Reserves SPE
[MEASURING SECURITY OF SUPPLY ]
Christian Winzer, University of Cambridge,
Karsten Neuhoff, University of Cambridge
Daniel Ralph, University of Cambridge
Overview
Security of Supply is considered as one of the key objectives of European Energy Policy besides Climate Change and Economic Efficiency. Yet there are only few studies which attempt to quantify the term.
Most of the existing quantitative measures either use modifications of concentration measures like the Herfindahl-Hirschmann Index or construct an index based on expert ratings of risk categories for each energy source. Both types of study usually do not take into account the correlation structure between the risks. Another drawback is that risk is mostly expressed in the form of dimensionless values, which makes it difficult to compare it to other objectives or make decisions about the economic efficiency of security standards. There is a group of papers that consider correlations by using portfolio theory to model the risk of energy prices (Awerbuch 2003) or costs (Jansen 2006). However, the portfolio approach has not been applied to the analysis of physical disruption probabilities.
In this paper we introduce a framework for the calculation of physical disruption risk of an electricity generation portfolio, depending on the diversification of primary energy supplies and generation technologies. The risk sources we take into account for each element of the portfolio are political, technological and intermittency risk. Technological risk has been a central aspect of reliability models for a long time. The importance of political risk and intermittency risk for the electricity sector is more recent. It is expected to further increase due to rising shares of gas fired power plants and intermittent renewable generation. So far the analysis of these risk sources has largely been carried out in separate strands of literature. However, whether energy flows are disrupted due to political tensions, technical breakdowns or weather conditions does not make a difference to the customer. An integrated assessment is therefore important.
Methods
§ Risk portfolios
§ Analytical calculation of probabilities
§ Simulation (if time allows)
Results
Our model allows for a comparison between the contribution of different risk sources to the security of physical supplies. It illustrates interactions between political, technological and intermittency risk and the effect of policy measures on the security of supplies. The sensitivity of risk to alterantive generation mixes and risk structures is calculated so as to explore the resilience of a system to changing policy and climate conditions.
Conclusions
The analysis of supply risk based on concentration measures that do not take into account the disparity between import streams is insufficient. Portfolio theory offers a more adequate tool to adress the effect of possible correlations between the risk from different sources and their combined impact on the security of supplies.
References
Awerbuch, S. & Berger, M., 2003. Applying Portfolio Theory to EU Electricity Planning and Policy-Making, IEA.
Bohi, D.R. & Toman, M.A., 1993. Energy security: externalities and policies. Energy Policy, 21(11), 1093-1109.
Grubb, M., Butler, L. & Twomey, P., 2006. Diversity and security in UK electricity generation: The influence of low-carbon objectives. Energy Policy, 34(18), 4050-4062.
International Energy Agency, 2007. Energy Security and Climate Policy Assessing Interactions.
Jansen, J., Beurskens, L. & van Tilburg, X., 2006, Application of Portfolio Analysis to the Dutch Generating Mix, Energy Research Center at the Netherlands (ECN).
Jun, E., Kim, W. & Chang, S.H., The analysis of security cost for different energy sources. Applied Energy, In Press, Corrected Proof Available at: http://www.sciencedirect.com/science/article/B6V1T-4V8FFJW-3/2/71fbd8d7486f95b329a208aaedd7cda8
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