Future Threats to the European Energy Infrastructure

Foresight and Public Behaviour Study February 2015

A report arising from the ESRC project “Threats to infrastructure: consolidation, collaboration and future orientation ES/K000233/1

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PREFACE

This report considers the future of the energy infrastructure in Europe in terms to future threats, what may be

plausible public behaviours, and emergency responses, in the event of a failure of that infrastructure at a city

level. The report is based upon information obtained from expert insight into the Energy infrastructure from

the private sector from the Nordic countries, an energy infrastructure exercise involving London Resilience,

private sector energy suppliers and infrastructure owners and finally from interviews with infrastructure

emergency responders and COMAH operators. The report forms part of the ESRC funded project “Threats

to infrastructures: consolidation, collaboration and futures. This work was supported by the Economic and

Social Research Council [grant number ES/K000233/1 ].

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Table of contents

1. Europe's Current Energy Usage ................................................................................................................ 4

2. High Impact Historical Events that Decrease Supply ................................................................................. 7

2.1 Natural Disasters ............................................................................................................................... 7

2.2 Events Caused by Man ...................................................................................................................... 9

2.2.1 Accidents ....................................................................................................................................... 9

2.2.2 Terrorist Activity ............................................................................................................................. 9

2.2.3 War .............................................................................................................................................. 10

2.3 Problems with Increasing Supply .................................................................................................... 12

2.3.1 US Shale Oil ................................................................................................................................ 12

3. Possible Future Threats ........................................................................................................................... 15

3.1 Oil and Natural Gas Supplies .......................................................................................................... 15

3.2 Resource Scarcity ............................................................................................................................ 17

3.3 Social and Political Changes ........................................................................................................... 18

3.4 The Green Agenda .......................................................................................................................... 19

4. Summary: threats to infrastructure ........................................................................................................... 20

5. Public behaviour and emergency response in an energy infrastructure failure at the city level .............. 21

6. Conclusions .............................................................................................................................................. 25

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Future Threats to Europe's Energy Infrastructure To understand the future threats to European energy infrastructure, first there must exist a

good understanding of how much energy Europe uses, and where this energy comes from, both from source type and from a geographical perspective. Similarly, consideration also has to be given to how this picture might change in the future.

1. Europe's Current Energy Usage

Figures 1 to 5 were produced1 using data from the BP Statistical Review of World Energy,

June 2014. Figure 1 shows the split of energy types used in Europe given in oil equivalents. It can be seen that about three quarters of all energy comes from fossil fuels, with the rest being reasonably equally split between nuclear and renewables. There is clearly a political drive to increase energy production by renewables, as well as uncertainty about nuclear, but it cannot be disputed that oil, coal and natural gas form a crucial part of Europe's energy industry.

Figure 1 About 75% of oil consumed in the EU is imported from outside the EU, which, considering that oil makes up about one third of the overall energy consumed, is of some significance (figure 2). In terms of natural gas, Europe imports nearly half the amount consumed, producing just over half in Europe itself (figure 3). Similarly, over half of the coal used in Europe is imported (figure 4). The threats to Europe's energy infrastructure will be of varying nature depending upon whether the infrastructure is based within the EU or whether it

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relates to imports from outside. Within the EU, in theory, the threats should be easier to identify, as well as to manage, compared with the more uncertain and volatile nature of threats from further afield. The extent of future threats to infrastructure will be contingent on how dependent the EU is on external imports, compared to how much energy is produced from within.

Figure 2

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Figure 3

Figure 4

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Looking at natural gas imports (figure 5), an overwhelming 50 % of these come from Russia. If anything untoward were to happen with the supply of Russian gas then clearly the effect seen in Europe would be dramatic. By this logic, to fully understand or identify threats to European energy infrastructure, it is crucial to understand where the energy is coming from, and then investigate the possible threats associated with this supply. In terms of predicting threats, it is easier to identify low level threats that are reasonably easy to manage and mitigate. However, unpredictable threats from political instability are harder to mitigate against.

Figure 5 2. High Impact Historical Events that Decrease Supply

2.1 Natural Disasters

If we look back over recent years, a number of high impact natural disasters have impacted on energy supply and use. On the 14th April 2010 the eruption of the Eyjafjallajökull volcano in Iceland caused an unprecedented closure of air space in Europe and North America. According to Sammonds, McGuire and Edwards2 'the impact of the eruption on regional air space could have been predicted and better prepared for as the growing problem of aircraft-ash cloud encounters has been recognised for decades'. However, this high impact event which had a worldwide effect was not predicted, and thus 'the response to the ash cloud’s arrival in UK and adjacent air space was entirely reactive and therefore less effective than it should have been'. The effect of the eruption was significant; there was a six day flight ban in Europe and businesses were unable to ship their goods by air during this time, in particular affecting food and pharmaceutical industries, as well as IT companies. The slowing of economic activity then affected patterns of energy demand, which in turn temporarily reduced the demand for oil products, if only at a very minor level3. According to Whipple, in the week of the eruption the demand for jet fuel fell by two thirds, and Europe would normally

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use around 1.2 billion barrels of jet fuel a day for internal flights. The larger neighbouring Katla volcano erupts with greater frequency2, and it can be imagined that this could have a significant effect on Europe's energy infrastructure. The eruption of the Eyjafjallajökull volcano is one example of an unanticipated natural disaster. Another major natural disaster directly affecting energy is the accident at the Fukushima Daiichi Nuclear Power Plant, Japan, which occurred on 11th March 2011. The 9.0- magnitude earthquake and the subsequent tsunami 'had a major impact not only on the safety of the people and the environment surrounding the site, but also on Japanese economy due to the affectation on the energy and agriculture sectors'. According to Mannan et. al4. whilst the accident clearly affected the Japanese economy, the effects extending beyond had a worldwide impact. The risk perception toward nuclear energy plants changed after the event, and has affected the future nuclear strategy of some European countries. As an example on the 15th March 2011 the German government permanently shut down the oldest eight of their seventeen nuclear power stations. According to Joskow and Parsons5, a law was passed in June 2011 by the German Parliament to phase out Germany's remaining plants by 2012, and presumably to build no further plants. Furthermore, the Swiss Federal Council recommended that Switzerland's existing reactors are closed down at the end of their current licenses and that no license renewals are issued, a proposal that was approved by parliament. This recommendation was issued even though the nuclear regulator had identified no new safety issues in light of the Fukushima disaster, and additionally despite an earlier referendum in support of the construction of replacement reactors, hence the decision can be seen to be purely behavioural as a response to the disaster. In the words of Mannan et. al. 'One of the factors that may have amplified the impact on public’s risk perception of the Fukushima Daiichi accident was news coverage'. The news coverage of the accident eclipsed that of the tsunami and the earthquake,' despite the devastating consequences of the earthquake and the tsunami in terms of fatalities, evacuated communities, and material losses'. In today's instant media world, the public can quickly follow the stories of interest to them, and hype and hysteria can rapidly distort the actual risk, which in turn guides the public's behaviour and in turn that of the politicians. In Germany, after the accident there were large anti-nuclear protests which put real pressure on the government. In this way, a singular event such as the accident at Fukushima can become a very real threat to Europe's energy infrastructure, simply by the reaction of the media to such an event, rather than based on a calculated analysis of the facts. Whilst the volcanic eruption had a temporary effect on energy demand, it did not lead to any great changes in energy infrastructure, other than featuring as an item of interest for most insurance firms. However, the earthquake and tsunami in Japan altered the world's view on nuclear power in a matter of days due to a behavioural reaction. Presumably then, further natural disasters could easily affect other energy industries, for example a large naturally caused accident in a coal power station with great human or environmental impact, or flooding due to a disaster at a hydroelectric plant, could lead to a change in the way we view these energy sources. In today's world where media coverage of events cannot be controlled and is accessible to all, it is hard to predict how the public will react to such events, and public opinion cannot be steered due to the sheer amount of information available. These natural disasters are hard to predict and anticipate, especially in terms of the effect they may have on energy infrastructures around the world, and they offer up a real threat to Europe's energy infrastructure in the future, and one that remains more or less a wild card. Whilst

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perhaps it is possible to predict many extreme happenings, to try and do so for all possible events and moreover to attempt to mitigate these risks would not make economic sense. Perhaps the best way to mitigate against such risks is to have a better understanding of the world's reaction to such events, and how that could in turn affect future energy strategy.

2.2 Events Caused by Man

2.2.1 Accidents

It is not only natural disasters that have a significant impact on our risk perception of energy types and thus shape our energy strategy. Accidents caused by man can also affect the world's view of energy sources. An example is the BP Deepwater Horizon disaster which occurred on 20th April 2010 in the Gulf of Mexico and was again covered majorly by the world's media, and, just as the Icelandic eruption and Japanese reactor accident, shocked the world by being an event far worse than many would have predicted or even imagined. Whilst rig disasters and oil spills have come to be expected in recent years, the sheer magnitude and duration of the Deepwater Horizon disaster eclipsed what had gone before. However, in terms of worldwide impact on energy infrastructures and strategies, whilst there was an impact seen shortly after, this did not last6. In terms of supply and demand, it follows that if the supply of a certain commodity decreases then the price for this commodity will increase, and vice versa. The US government announced drilling restrictions for offshore oil drilling on May 28th 2010, two of these being a ban on applications for drilling permits in deep water for at least six months (as being in deep water was one of the reasons why the accident occurred) in addition to stopping mobile rigs drilling for exploration of oil in deep water, which effectively stopped 30 rigs from performing exploration work at the time. After these measures were put in place, the oil price rose by 4%, which could be attributed to the supply of oil decreasing due to these restrictions. However, the increase was not sustained, most likely because 30 rigs is far from a large number on a worldwide scale6. Whilst the accident shocked worldwide, it would appear that in this incident behaviour did not adversely affect energy infrastructures in Europe or elsewhere, at least not on a large scale and not for a noticeable period of time. BP of course was affected majorly as a company and suffered economically, and the industry in general focuses on safety even more than before in light of this major incident.

2.2.2 Terrorist Activity

In recent years, terrorist attacks have come to feature as a concern across the world. The attacks on the World Trade Center on 11th September 2001 for example closed the New York Mercantile Exchange (Nymex), which lead to fears that the oil industry would not be able to set the oil price as they were temporarily deprived for approximately one week of one of their base markets. In this case though, other commodity and predictive markets stepped in, and the oil industry was not noticeably materially affected, at least in the short term, according to an article written for congress in 20027. Immediately after the attacks the oil price rose, which perhaps represents the sudden new risk perception concerning availability of oil from the Middle East in light of hostilities between the US and the Gulf States. However, in reality there was little change in supply and demand and thus this rise

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in oil price was short lived. In 2002 it was thought that the damage had little lasting effect. However, looking back, it can be seen that the events of 9/11 put a risk premium on the price of oil that has persisted until the global economic crash in 2008. Before the event, oil prices were around $22 to $28 per barrel, and by July 2008 they were at a high of $1478. Ironically though, it was the Gulf Oil States that benefited (from an energy perspective) from the 9/11 attacks, and consequently from the rising oil price. Shortly after the incident, Arab capital was repatriated from the US on a large scale out of concern of it otherwise being seized. This was most marked in Dubai and Abu Dhabi, and still the case but less so in Saudi Arabia, Kuwait and Oman. Whilst the unfolding political situation was not so good for the rest of the Middle East, and clearly detrimental for Iraq, nonetheless the increased affluence of the area compared to before the terrorist attacks is apparent. So eventually it was the Oil States of the Gulf that benefited from the higher oil prices and inward direct investment which came about as a result of the events of 9/11. Thus terrorist attacks, which seem to be becoming ever more frequent, can have detrimental and unexpected effects on energy infrastructure in Europe, and worldwide, which will consequently also affect Europe being as most of the energy markets are international. Due to the nature of such attacks, it is hard to predict them and their effects, and consequently difficult to mitigate this threat.

2.2.3 War

Other events caused by man which have, and have had, significant effects on energy infrastructures are wars. Due to the way energy is now often traded globally, as has been illustrated here in terms of the large amount of energy imported by Europe for example, hostilities between countries will have a direct effect on energy markets. The Arab uprisings from 2009 had a marked effect on Europe's import of oil. Perhaps the country worst hit was Libya. Europe received over 85 % of Libya's oil exports in 20109 Just how much crude import from Libya contributed to the overall natural import as a percentage of various European countries and elsewhere can be seen in figure 6.

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Figure 6 - 'Relying on Libya'9

It can be seen that a significant proportion of oil was imported from Libya by many European countries, in particular Ireland, Italy and Austria, who all imported over 20% of their crude oil imports from Libya. At the beginning of 2011 Libya's oil production came essentially to a standstill (figure 7). Whilst it is believed that supplies were not damaged in the long term, this dramatic halt was not easy to cushion for Europe considering how heavily it relied on Libya's crude oil exports.

Figure 7 - Libyan oil production, million b/d10

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According to El-Katiri, Fattouh and Mallinson, the Arab Spring created one of the oil market's largest disruptions in supplies throughout history. Clearly this massive fluctuation in supply from the area affected the oil price, which can be seen in Figure 8. The Libyan unrest is marked in 2010/2011, as well as further key Middle East and North Africa (MENA) events.

Figure 8 - Brent prices and key MENA events, $ per barrel11

2.3 Problems with Increasing Supply

2.3.1 US Shale Oil

It follows logically then that, as Europe relies so heavily on imports, there are two ways to mitigate threats to its energy infrastructure. One would be to decrease this reliance on imports by increasing the primary production within Europe. A lot of Europe's focus leading up to 2020 is to increase the amount of energy generated from renewables, however, it has been highlighted here that it is not renewable energy that makes up the current base of Europe's energy picture. There is much uncertainty concerning whether or not it is possible, or even that there is enough commitment, to significantly increase the production from renewables. Simultaneously to this there is a push to decrease the reliance on oil derived energy types, and also nuclear, the latter especially in the light of the major and devastating accident in Japan. Europe is then pushing in general for a greener energy spectrum. At the same time, the US is investing serious amounts of money in developing oil and gas production from shale. This will be discussed in more depth, but essentially this move has flooded the oil market with extra production which consequently has had a huge impact on the global oil and natural gas market, and thus leaves Europe struggling further, as developing shale gas and oil is not currently part of Europe's future energy plans. Europe is thus putting itself at the mercy of the international market, and the international oil market at least is currently a highly volatile place. A second way for Europe to reduce threats to its energy infrastructure would be to ensure that whatever imports there are, are well distributed by geographical source, such that any one terrorist event, war, natural disaster etc. does not lead to too large adverse effects.

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As it can be seen that an increase in supply leads to a decrease in price, then the oil price over the last months of 2014 would suggest a great increase in oil supply. The discovery and development of oil production from shale has taken off in the US since 2008. It is a new technology whereby the oil is accessed by 'fracking', the process of creating hydraulic fractures, in shales. This leads to a relatively short lived production of oil, with production rates declining rapidly. This short production period, as compared to other more sustained methods of oil production, means that shale oil production is especially susceptible to short term oil price changes, due to the shorter production window. As can be seen in Figure 9, from 2008 to now, and peaking at about 2020 in the case of the reference case, US crude oil production has increased dramatically. This increase in production is primarily due to the production of oil from shales. This is still quite an uncertain technology and thus there is a

high and a low probability boundary in this figure, to represent the uncertainty of possible future production. The US used to rely heavily on importing oil from OPEC (Organisation of Petroleum Exporting Countries), but since the domestic US oil boom, is clearly relying less on foreign imports. OPEC will often decrease their production of oil if there is a drop in oil price, preferring to save their reserves and sell them for a more lucrative price at a later time. However, on 27th November 2014 OPEC decided to keep the group’s collective output target unchanged at 30 million barrels a day. With their output unchanged, and a dramatic increase in the US output, the market has been flooded, which has a clear effect on the oil price (figure 10).

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Figure 10 - Brent Crude Oil price in US Dollars as of end December 2014. Source: www.nasdaq.com The latest dramatic fall in oil price (end 2014) represents the increased production from the US and the OPEC decision to maintain production so as to compete on the flooded market. This reduces the oil price, which in turn challenges the price sensitive US shale oil market. Producing oil from shales is an expensive technology, and one which becomes economically unviable at an oil price below $50-7013. Companies producing in the US have responded to this decrease in oil price by curbing spending, reducing production or applying for fewer future permits. Conoco Phillips, one of the major players, was one of the first to cut spending on tight oil production, and others have followed suit14. OPEC predicts that by 2020 US shale reserves will be exhausted and thus the US will once again be dependent on OPEC exports, and the oil price return to a higher level. This is consistent with the US Energy Department's reference case. The sudden increase in oil reserves of one country effects the global market, and thus Europe is also affected. An oil price of $60 leads to many projects in the North Sea being economically unviable. However, due to the extreme upfront nature of investment in these projects, the majority of the money has already been invested, and now would be the time for returns. If the project was based on a breakeven price of $80, clearly it will then operate at a loss, but to stop it entirely would lead to an even greater loss as then there would be no returns at all to offset the initial investment. Many companies then are continuing with their current projects but halting anything that would have been upcoming in their portfolio, due to the new low oil price. In a few years' time, we will begin to see the effects of this strategy, as oil fields in the North Sea can take quite a few years to develop, and if new development is halted now at some point there will come some years with very few ongoing projects. Thus when the oil price rises again, if it does, the oil industry will take a while to respond, and we may have a

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problem with low production at that point. This would mean Europe would be more reliant on imports, and thus more vulnerable to market threats. It could also be postulated that if the US continues to have an oil boom then energy intense industries (for example chemical industries) would relocate to the US due to the cheaper prices - for example, gasoline prices have dropped dramatically in the last few months (figure 11).

Figure 11 - US Energy Information Administration If this trend were to continue, and industries relocated from Europe to the US, then a downward spiral may occur. There would be less demand for energy in Europe, thus less produced, and it then becomes even more expensive for industries to remain, and even cheaper by comparison to relocate to the US. Essentially, a major threat to European energy infrastructure is global supply and demand, within any energy type. If one country or region suddenly increases the supply of a fuel (for example the US with oil and gas) then this has major effects on the global market and consequently Europe. Natural disasters, accidents, wars, terrorist attacks etc. described earlier represented a decrease in supply. However, it can be seen that an increase in supply can have just as severe, if not more so, consequences. Clearly a change in demand will also affect Europe's energy markets. Essentially these are one and the same thing, depending on the perspective; the US' increase in the US supply decreases the demand for OPEC oil. 3. Possible Future Threats

Natural disaster, man-caused accidents, terrorism, warfare, etc., these things can, and surely will, all occur. But what about the future? What different threats does that hold? It is difficult to speculate, given the breadth of possibility, but some categories seem to stand out at least. 3.1 Oil and Natural Gas Supplies

Europe relies strongly on both Oil and Natural Gas as fuel sources. Oil and gas production, as already commented on, is particularly vulnerable to instability in energy producing regions such as the Middle East. Furthermore, as has already been highlighted, Europe is strongly dependent on Russia for its natural gas imports, and just under half of natural gas used in Europe is imported. In addition, Europe’s natural gas consumption is projected to grow while

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domestic production of natural gas in Europe is projected to decline, thus leaving Europe more dependent on imports, and thus more dependent on Russia as a supplier. This increasing dependence on one provider is a risky strategy, and could lead to issues with natural gas supply in the future, particularly when coupled with a falling gas price due to the production of US shale gas. In fact, it has been speculated that there could add to instability of supplies as fuel production can be used strategically. There have already been, and still are, many wars waged due to oil resources. There have also been in the past attempts from the Middle East to use oil as a weapon, i.e. to only export it given certain conditions. However, the US has now, for the first time, started to follow a similar strategy. For example, the US has blocked access to Western oil-drilling technology, curbed export sales and put considerable pressure on major oil-importing countries to decrease (preferably to nothing)

how much oil they import from Iran, including China, India, South Korea and some European countries. This has had the result of decreasing Iran's income from oil exports from $118 billion to $56 from 2011 to 2014 due to Iranian exports dwindling by about one million barrels per day15. Before the advent of US shale oil, a one million barrel reduction on the global scale would have had a large impact on supply, and thus adversely affected many countries. However, in today's oil glut, the US presume this decrease will only affect Iran, and thus it is an effective and direct method of warfare. A similar tactic is being used towards Russia. According to Klare15, 'the increase in domestic crude output has imbued American leaders with a new sense of energy omnipotence, allowing them to contemplate the decline in Iranian exports without trepidation'. A quote from Tom Donilon, who was Obama's national security advisor at the time, from a speech made at Columbia University in April 2013 supports this view: “America’s new energy posture allows us to engage from a position of greater strength. Increasing U.S. energy supplies acts as a cushion that helps reduce our vulnerability to global supply disruptions and price shocks. It also affords us a stronger hand in pursuing and implementing our international security goals.” Essentially, the US now finds itself in a strong position when it comes to energy, due to the fact that they have reduced their reliability on imports, especially with a fuel source that is still so prevalently used, despite it not being seen as a way forward in line with a green strategy. Using oil as a weapon is thus possible for them, and is a way to go to war without using planes, missiles and troops. Klare states that the US's behaviour reflects the fact that 'energy, in this time of globalization, constitutes a strategic asset of unparalleled importance'. On this basis, if Europe continues to rely heavily on oil and natural gas in the future, and were it to import larger amounts of these, then it may well find itself in a rather vulnerable position, open to all the fluctuations of the market without having a backup to employ. Another example of how an increase in supply effects global markets, is how Germany is faring in the light of a market flooded with oil and gas16. Firstly, cheaper natural gas in the US, as mentioned earlier, has lowered electricity and other energy costs for American manufacturers. However, at the same time, these costs are rising in Germany, and continue to do so. Energy-intensive industries, of which 36 % reside in the EU and only 10 % currently in the US, struggle especially when faced with these rising costs. Thus, energy-intensive industries in the EU are likely to look at relocating to the US where they can reduce their costs. Secondly, the US is preparing to export its natural gas in a liquefied form (LNG) by building export facilities in, primarily, Asia. The current gas prices in Asia are four times those in the US, and Europe's gas prices three times the US prices. If Asia then has access to natural gas four times cheaper than now, it may increase its competitiveness compared

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to Europe. However, Asia, if receiving natural gas from the US, will not import as much from OPEC countries, which may mean cheaper natural gas (than now) for Europe. It is a complex global market, but doubtless there will be many changes, perhaps some dramatic, over the coming years, and some of these surely pose a threat to Europe's future energy markets.

3.2 Resource Scarcity

Many of the energy resources used are not sustainable, even in the short term. Whilst there is an aim to increase dependency on renewables, the reality is still that non-renewable fuels make up the majority of energy used in Europe. By definition, these fuel types are running out. We have now entered an era where we are seeing the effect of this, which is reflected in increased prices for these commodities, as well as increased conflict over them. According to the International Energy Agency's World Energy Outlook, there will be a rise in oil demand of 1% each year between now and 2030. This would take the global requirement from 85 million barrels a day (2009) to 105 million barrels a day in 2030. This growth in demand is predicted to come from non-OECD sources. According to Evans17, in recent years concern has arisen over rising demand for natural resources - food, water, land and oil - and this demand will soon outstrip the supply available. Partly this concern arises due to the projected impacts of climate change. The world has woken up to the impact that over seven billion people have, their rapid development and thus growing requirements. In a world were globalisation is now the buzz word, commodities such as oil and food need to be assessed at the global level. This then complicates the process of assessing what a country or area's carrying capacity is. According to the report, this complicated situation can lead to a country consuming some commodities faster than its own resources would normally allow. Another problem can be that if a commodity is consumed somewhere else in the world, it may then affect the ability of a country to use that commodity. This was the case in 2008 when the food price rose rapidly. The US used crops as a source for biofuel, which then led to an increase in price for food elsewhere in the world. In 2009, the International Energy Agency warned that as a result of the global financial crisis, and the subsequent reduction in investment of oil production thereafter, an oil 'supply crunch' could well occur18. However, there now exists a global glut of oil, five years later. It seems that for years, decades even, there have been warnings of depleting oil supplies, often followed up by a prediction that oil will run out 'in twenty years', be that prediction from 1980 or 2000. Currently we have seen in the oil industry that science is keeping abreast of diminishing reserves and enabling further oil to be produced using new methods and technologies. Alongside this there are new developments in other technologies, fuels cells, electric cars, and solar energy. It is also an economic question. The higher the oil price, the more incentive there is to research new more expensive technologies to produce oil that was not possible at a lower barrel price. Ironically, with the current low oil price of around 60 dollars per barrel, there is little incentive to invest in new projects, and again, as in 2008, there will be a subsequent reaction where investment in the oil industry slows, and thus likely a period where a 'supply crunch' exists. It is hard to predict just if and when energy supplies will run out. Some critics postulate that proven reserves will supply projected demand for decades. Others are not so optimistic. Indeed, the International Energy Agency's chief economist said that peak production of oil

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might well take place by 2020. It is also hard to predict which developments in technology will occur in the coming years. What is certain though, is that a very real threat to Europe's future energy infrastructure is increasing competition for energy in response to the rapidly rising global demand. It is predicted that the population will by nine billion in 2050, two billion more than currently, and thus that the demand for energy could increase by up to 80% in that time. There exists a period of transformation in energy use, as the population increases, living standards and education are improving globally, and urbanisation is accelerating. 3.3 Social and Political Changes

Whilst countries themselves are responsible for their own national crises, who is responsible on the international scale? This can often be far from clear in each different case. As energy markets becomes increasingly international rather than limited by one country's borders, so too do the threats to these markets. One way this is being handled in Europe is to create guidelines for trans-European energy infrastructure. According to Currie and Gärdfors19, up till now 'there has been limited support for crossborder transmission at an EU level'. Each member state has been responsible for its own energy infrastructure. However, energy infrastructure has now been elevated to an EU level, by the European Council. The Council of the European Union in 2013 introduced a new regulatory framework to help modernize and expand Europe's energy infrastructure in order to allow the EU to meet its energy targets of reducing CO2 emissions and increasing production from renewables, to build a fully internal market, to transport renewable energy across Europe and to provide additional sources of natural gas. Regarding the last point, from 2015 a target has also been set by the European Council that 'no member state should remain isolated from the European gas and electricity networks'20. From this new regulatory framework, twelve strategic trans-European energy corridors and areas have been highlighted, and from that 248 infrastructure projects of common interest have been identified. Essentially, Europe needs to reform its fragmented internal market and be sufficiently connected, if it is to survive and flourish in the new global energy markets. A harmonized EU market is needed now more than ever due to the changing way in which energy is produces and used. With increasing use of renewables, which are fluctuating in nature and often far away in source from where they are needed, a reliable distribution network is needed to account for this. It is also important to secure a better gas infrastructure so that gas security can be achieved, both by distributing from the current sources and by enabling alternative sources to be viable. As has already been highlighted, natural gas is an important fuel source for Europe currently, and will become even more so in the future. Natural gas is already a key part of Europe's future, so there is much focus on ensuring the security of this gas supply, as well as updating the infrastructure. This is particularly crucial as countries in the Eastern part of the EU undergo geo-political change. Currently in the EU it is mainly Western member states who see natural gas and renewables as integral for the future. They have well developed natural gas markets, with competitive prices and markets that are resilient to supply shocks. This is on the contrary to Eastern member states, which rely heavily on coal, and see renewables often as not economically viable. Infrastructure in Eastern Europe then, and also in Southern Europe, is not as well developed and requires further investment. The result is that the member states in the East and the South are unable to benefit from the varying different supply sources in Europe, and thus tend to depend on a single source, such as coal in Eastern Europe.

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It can be seen then, that much has to be done, and is indeed planned, to render Europe as one market when it comes to energy distribution. This has been identified as a key goal for Europe's future energy success, and failure in this task will indeed be a threat to Europe's energy infrastructure. What with changing political relationships between member countries, as well as with countries bordering the EU - for example Russia and the Ukraine - as well as uncertainty of the economic priorities of countries such as Greece, or hypothetically even the UK, as to whether they even want to continue as member states, it can be seen that a harmonized European energy market may not be so simple to achieve. In recent European Parliament elections, it transpired that many member states saw a shift towards anti-EU representation, preferring to return to a more nationalistic approach. With regards to energy markets and infrastructure, this would surely introduce more threats to Europe's stability. According to Currie, 'with the current time scale of permitting, developing, financing and constructing interconnector projects, the targets are not achievable' and to Boersma, 'financial budget is too mediocre to make an actual difference'21. Defragmenting the internal European energy market is certainly a recognised target but it requires the overcoming of many obstacles, and it can be seen as a major threat to the EU's future energy success. According to Boersma, possible supply shocks and market abuse in Eastern and Southern Europe may well occur, over the next decade, as a result of a slow attempt to harmonise Europe's energy markets.

3.4 The Green Agenda

According to the European Commission, Europe is on target to meet its 2020 objective to reduce carbon emissions, set out in the Kyoto Protocol. To help achieve this goal, an Emissions Trading System (ETS) has been set up, not just nationally but to cover the EU as a whole. Power plants, energy intensive industries and airlines are provided with, or buy, an annual quota, or a cap, on emissions. This quota is decreased by a few percent each year, in line with the 2020 targets. If the cap is exceeded, heavy fines ensue. Companies are able to trade their emission quotas, and because these are limited, it follows that they have a value. According to the EU commission, the EU ETS system is the first - and still by far the biggest - international system for trading greenhouse gas emission allowances, the EU ETS covers more than 11,000 power stations and industrial plants in 31 countries, as well as airlines'. Phase 3 has now been entered of the EU ETS system, spanning 2013 to 2020. One major change in this period is that a single, EU-wide cap on emissions in now in place, instead of the previous system of national caps. In this way the European Commission intends to reduce emissions of the EU in a harmonised way, hand-in-hand with attempts to integrate the energy infrastructure throughout the EU. Again, it makes sense to consider the EU as a whole when considering the future energy picture, in terms of both stability and effectiveness. So far, the EU ETS has been successful, and this has inspired other countries and regions to launch similar carbon trade schemes. The EU proposes to link up with other systems around the world, to form the backbone of an expanded international carbon market, known as ICAP22. One great uncertainty for companies in the future, is carbon prices. After the recession of 2008, reduced growth meant that companies had more emissions allowances than they required, thus the price decreased. The EU commission had to compensate for this by reducing quotas, otherwise progress towards the targets would not have been on track. There has been much talk of carbon sequestration in recent years, the process of capturing carbon dioxide from power plant emissions, and containing

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it in rock deep underground. It is still uncertain the effect this will have on minerals and ground water, and much research is being conducted in this area. In addition to this, the oil industry, particularly onshore in the US, has long since used carbon dioxide to inject into oil and gas feels as a means to sweep out residual oil there. This is a highly effective technology which removes oil trapped in the ground that is not produced under normal production methods. Onshore in the US this is economically viable, due to the close proximity of the oil fields to industry. Were this technology to be used elsewhere around the world, and in particular offshore, for example in the North Sea, it would not be economically viable. The costs of capturing the CO2 from power plants, transporting it offshore - either by tanker or purpose built pipelines - and then replacing the current pipeline infrastructure offshore and below ground to a non-corrosive one able to take CO2, is significant. However, were CO2 to have a price in the sense that oil companies were paid to take it, this technology would rapidly become viable. Were that to happen, it would open up large oil and gas quantities currently being left in the ground. Ironically, this is counterproductive for reducing carbon emissions. Essentially, how the carbon market develops over the next few years, both at the EU level and also globally, could drastically effect the energy markets around the world. A high CO2 penalty price will also increase investment and focus on renewables, which is of course the intention. As this is a somewhat artificial market, in that it has been created for this purpose, and, for example in the instance of the recent recession, it needs to be controlled to enable it to function as intended, it stands to reason that it is also somewhat volatile, and an unknown factor for energy companies to factor in to their future development. There is a direct link between the oil and gas industry and renewables. The renewable energy market needs high oil prices. Currently, the renewable market cannot survive without significant subsidies. The higher the oil price, the more research there is into developing alternative fuel sources, and the easier it is to give subsidies to these alternative energy types, forming a positive cycle. When the oil price falls, the subsidies in this way become indirectly reduced. In essence, with a new low oil price setting the bar for the following years, the incentive to develop greener energy types has reduced somewhat, from a purely economic perspective. Perhaps the ETS system needs to be adjusted to reflect this, but it goes to show that there are many interplaying markets at work, and the way they rise and fall individually and effect one another has the potential to affect the EU's future energy infrastructure to rather a large extent, and not in a way that is so easy to predict23. 4. Summary: threats to infrastructure

There are many threats to Europe's energy infrastructure in the future, both potentially naturally caused, and caused by mankind. The challenge is identifying these, assessing the extent of the risk they carry, and finding ways to mitigate this risk. In a world where globalisation is now key, companies increasingly work on an international level, social media brings instant updates from around the globe, and national borders are beginning to have less significance from an energy markets perspective, this work is critical. According to Garrett and Piccini24, 'in the context of an increasingly multi-polar global economy, actual and potential natural resource-related security and conflict challenges remain under researched'. The postulate that there is not enough work being carried out in this area, and that this leaves the EU at risk. They intone that the EU must define its role in the future global economy, and consequently adapt its strategies accordingly. One of the main issues will be security of supply, as highlighted by the dramatic response that the US' attempt to

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become more independent in oil and gas has had on international markets. The European Commission recognises this and released an EU energy security strategy on 28th May 2014, 'in response to the political crisis in Ukraine and the overall importance of a stable and abundant supply of energy for the EU's citizens and economy'. The strategy is based on an in-depth study of Member States' energy dependence, and in the short term focusses on increasing gas stocks, developing emergent infrastructure, reducing short-term energy demand and switching to alternative fuels. They plan to test the market with energy security stress tests, to for example simulate a disruption in the gas supply for the coming winter. This is one way to test the security of the EU's energy markets, and thus to act accordingly, in a time when this is not yet made critical by an event which is out of the EU's control. Other than the prior mentioned meeting the 2020 emissions targets and creating a harmonised

internal energy market, more longer term challenges include increasing energy production within the EU and thus reducing the reliance on imports, as well as diversifying supplier countries and routes where imports are relied upon. Essentially then, the EU needs to come together as a whole to create a strong unified energy market. How well this work and if it will even come about remains to be seen, but perhaps the success of this project will be the singularly largest factor in mitigating any future threats towards the future European energy infrastructure. 5. Public behaviour and emergency response in an energy infrastructure failure

at the city level

In response to future threats to energy infrastructures, such as the ones outlined above, London Resilience has developed a series of simulation exercises that aim to assess the impact of a disruption of energy supplies to a fictional city – “Anytown”. Two exercises were held in 2014 by London Resilience, in conjunction with this ESRC project, to assess the impact of energy disruption. The exercise participants included infrastructure owners, energy suppliers, the emergency services and representatives from a number of UK universities invited as part of the project who specialised in technical and information technology areas of infrastructure failure. The aim of the exercises was to simulate the impact of a localised, but substantive, disruption to gas supplies in the UK. The national transmission system for gas is operated by National Grid Gas in the UK who distribute energy through a number of regional supply networks. The exercise involved a disruption to local supplies. Although this can be due to many factors, including technical failure, once gas supplies have failed it is difficult to restore them to normal. For example, water ingress into gas supplies can take a number of weeks to clear. As with electricity supplies, a restoration of the gas supply is not instant and involves ‘isolating and purging’ the gas network, accessing each and every property. Access problems can add to the timescale of restoring gas supplies.

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Table 1: Impact on various groups of energy infrastructure failure in “Anytown”

Timescale Community / Political

Gas suppliers Other utilities Emergency services

Initial impact -How long to find out / how long would notification take

When the energy source was used, or through social or old media. Asymetric response – some members of the public would require immediate assistance First few hours would involve appraisal of political consequences

Telephone calls would come into emergency operations room. Immediate problems for hospitals and health care Public would be very anxious in Winter, and volume of calls would be seasonal.

Increased demand for electricity may lead to supply shortages. Use of electricity depends upon the season. Hospitals would lose catering, and eventually heating. May lead to health implications. Increased use of communications media. School closures if Winter.

Phone calls to emergency services for vulnerable people. Increased pressure on Accident and Emergency within hours.

3 days Noticeable political pressure on government. Questions asked about vulnerable people. Public would demonstrate altruistic behaviour, helping neighbours, looking out for vulnerable people. Minor increase in crime for generators etc.

Diversion of workers from other areas puts pressure on supply elsewhere. Priority would be vulnerable customers. Information through all sources, including social media and leaflet drops. Distribution of electric heaters,

Switch to electricity causes potential overloading of network and rolling blackouts. Environment Agency working on possible water contamination issues.

Problems with infection control standards / heating. Increase in patients with burns / fire risk as turn to alternative heating and cooking sources. No elective surgery as can not sterilise instruments Hospital waste building up as not able to incinerate.

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School closures and pressure on childcare lead to protests. Small proportion of people would leave area to stay with friends or family. Opinions shared on social media. Improvisational activities for heating.

Discharge delays as can not send vulnerable patients to cold homes. Blue light services needed to get access to properties / may be needed at points for heater distribution.

14 days Use of external agencies such as Red Cross and charities. Trust in politicians and utility providers falls. More trust in engineers as signs that problem is being solved. Local political issues over who gets gas supplies turned on first. Clashes between volunteers and utility companies as to local priorities. Exploitation of some customers through black

Prioritising vulnerable customers. Management of public expectations

Electricity and other utility networks under high pressure with possible cuts / interruptions to services.

Move patients to other cities. Problems with absenteeism as emergency service workers look to support families / friends May be problems with storage of certain pharmacuticals.

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market in alternative fuels (eg coal, oil) High level meetings (eg COBRA or Ministerial meetings)

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6. Conclusions

a. The energy infrastructure faces a number of threats to its short and long term future.

b. New methods of energy production, such as shale, are not long term solutions to the security of energy supplies in the future.

c. Political shocks and disasters can have a disproportionate impact on energy supply given scarcity.

d. Social attitudes in Europe, in terms of anti-nuclear attitudes, the green agenda and European membership can increase the risk of dependence on limited energy sources, and lead to future problems for integration of supply.

e. Co-ordination (defragmentation) of the infrastructure in Europe to assure future supplies is proceeding at a very slow, incremental rate.

f. The impact of a failure in the energy infrastructure of a city will have compounding impacts upon other sectors including other energy providers, health, emergency services and the community.

g. Following an energy interruption it can take a long time to restore power. h. There are powerful political consequences following an interruption in the energy

supply including a fall in political trust and potentially protests.

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