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Energy & Climate Security Risk Index

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Energy & Climate Security Risk Index

The Energy Security Risk Index reflects the four dimensions of energy security (geopolitics, economics, reliability, and environment), covering 39 individual risk indicators, based on thousands of data points. Each of the four dimensions of energy security constitute a sub-index. Read the metodology

Geopolitics

• Security of World Oil Reserves
• Security of World Oil Production
• Security of World Natural Gas Reserves
• Security of World Natural Gas Production
• Security of World Coal Reserves
• Security of World Coal Production
• Security of Petroleum Imports
• Security of Natural Gas Imports
• Crude Oil Price Volatility

Affordability

• Oil & Natural Gas Import Expenditures
• Oil & Natural Gas Import Expenditures per GDP
• Energy Expenditures per GDP
• Energy Expenditures per capita
• Retail Electricity Prices - HH
• Crude Oil Prices
• Energy Expenditure Volatility
• Science & Engineering Degrees

Reliability

• World Oil Refinery Utilization
• Petroleum Stock Levels
• Energy Consumption per Capita
• Household Energy Efficiency
• Commercial Energy Efficiency
• Industrial Energy Efficiency
• Electricity Capacity Diversity
• Electricity Capacity Margins
• Electricity Transmission Line Mileage
• Transmission and distribution losses
• Transportation energy use per capita
• Transportation energy use per $ GDP

Sustainability

• Energy Intensity
• Fossil Energy Intensity
• Transportation Non-Petroleum Fuels
• Energy-Related CO2 Emissions
• Energy-Related CO2 Emissions per Capita
• Energy-Related CO2 Emissions Intensity
• Electricity non-CO2 Generation Share
• Land Cover
• Waste per Capita
• Waste Recovery

Sector overview

Energy & Climate Risk

The Energy and Climate Security Risk Index (ESCRI) tracks the key energy and climate security risks across selected European countries based on a uniform quantitative approach. The tool encompasses a comprehensive list of factors – related to geopolitical risks, energy supply affordability, system reliability, and the link between decarbonisation and energy security – all of them interpreted through the prism of strengthening Europe’s independence in times of a major threat to the European security and stability.
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Bulgaria has seen the fastest improvement of its energy and climate security position in the SEE region. The main reason has been the relative decline in energy poverty, the pressure on the macroeconomic stability from oil and gas imports and the significant expansion of renewable energy sources in power generation. This coupled with a diverse power supply system, in which nuclear power contributes to a third of generation, and the opening of LNG imports in 2019 brought down even traditionally high reliability risks.

Greece has seen the lowest decline in energy and climate security risks since the 2008 as sustainability and reliability risks remain relatively flat.
A significant vulnerability comes first from the continued large dependence on energy imports (both oil, gas and electricity) and second to the insufficient transition of the islands’ energy supply to locally-sourced renewable energy.
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Romania’s energy and climate security position has improved markedly in the affordability and sustainability categories as energy consumption has fallen significantly and RES-based power generation investments have skyrocketed. As in the other two SEE countries, the decline in oil and gas prices and the shrinking of energy poverty have been improving the Romania’s affordability risks. The country has also become even less dependent on oil and gas imports from Russia and will be most prepared to become mostly self-sufficient in the wake of the Russian war in Ukraine.

Geopolitical Risk

The Geopolitical Risk sub-index reflects the impact of global factors such as crude oil prices on national energy security. Some of these factors are common for all countries, while other are country-specific.
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The geopolitical risks to Bulgaria’s energy supply have been going down since 2016 following their surges in 2011 and 2014 on the back of skyrocketing oil and gas prices and the instability related to the Crimean crisis in Ukraine. The most important country-determined geopolitical risks, namely the security of oil and gas imports, have gone down on the back of lower energy prices, the rise in global market competition and the diversification of Bulgaria’s gas supply in 2018-19 with the first ever large volumes of LNG deliveries from Greece. For the first time, Bulgaria replaced around a quarter of the gas supply from Russia with non-Russian volumes.

Greece has positioned itself as a natural gas hub in the SEE region receiving at the same time large volumes via pipeline from Azerbaijan and Russia and LNG. However, a long-term vulnerability is that Greece has kept increasing its overall dependence on natural gas , mainly in the power sector. This is bound to also expand the share of Russian gas in the mix despite statements by Greek politicians to the contrary. Two of the largest gas companies in Greece recently extended their long-term contracts with Gazprom until the latter part of the 2020s.

Romania has traditionally been leader in energy supply security as it is the largest oil and gas producer in the region. Although Romania exports refined petroleum
products, predominantly gasoline and diesel oil, it still is a net importer of oil and gas.
However, Romania is one of the most energy-independent countries in Europe and is a net exporter of electricity. The aggregated depletion rate of hydrocarbon reserves is 10% per year; meaning that without supplementary sources, in the next five to ten years Romania’s import dependence will double from current levels. Hence, although Romania has reduced its geopolitical risks linked to energy and climate, it remains quite vulnerable to oil and gas price volatility as well as the maintenance of hydrocarbon production.

Affordability Risk

The Affordability pillar assesses the impact of energy prices and energy imports on macroeconomic stability, as well as the household level energy poverty. Some of the indicators will directly show the effect of energy prices, in particular crude oil, natural gas and electricity prices for household and business consumers. Furthermore, the Affordability sub-index will take into account national expenditures on oil and gas imports and their weight relative to national GDP. Additionally, overall energy expenditures will be considered as major risk factors. They are strongly affected not only by the price level of different energy sources, but also by the fuel mix, consumer choices, and energy efficiency. In this sense, high energy consumption and the use of more expensive fuels influence strongly affordability risks.

Bulgaria is among the worst performers in SEE region in terms of energy intensity of the economy and energy poverty. Despite the improvement over the past several years, if we compare key risk metrics such as energy intensity and energy expenditures per GDP, Bulgaria still stands out as underperformer relative to Greece and Romania. In 2019, estimated energy expenditures in Bulgaria for every EUR 1000 of GDP stood at over EUR 65, 37% higher than in Romania and 45% higher than in Greece.

Greece has not seen any major improvement in its energy affordability position since 2015. Greece has suffered some of the worst energy poverty crisis after the 2009 economic crisis, during which period one in two Greeks was considered energy poor. The fall in oil and gas prices after 2014 did not resolve the structural problem with high levels of energy poverty in the country but have somewhat alleviated the pressure on household budgets. The 2021 energy crisis is likely to lead to a severe worsening of energy poverty indicators despite the decision of the government to cut energy taxes and increase energy subsidies to the most vulnerable segments of the society.

Romania’s highest energy security risks are related to its energy expenditure volatility, energy expenditure intensity, and energy intensity of the economy – particularly in the transport sector. Romania like the other two EU member states in the SEE are mulling how to complete the phase out of coal-fired power generation as quickly as possible without compromising the security of supply and at the same time preventing skyrocketing power prices. Energy poverty is probably the single biggest energy security risk faced by the country as close to 14% of Romanians faced difficulties paying their utility bills in 2020 and around a third of households fall below the poverty line when they have covered their energy needs.

Reliability Risk

The Reliability pillar reflects the exposure of the national economy and different sectors to potential energy supply disruptions. This includes a wide variety of factors, such as national petroleum/gas stocks, the spare capacity of the global oil refining industry, the resilience of the national electricity system, the energy intensity of the national industrial, commercial, and household sectors, as well as the role of the transport sector in the national economy. The risks for the electricity and natural gas system are of particular importance amid growing electrification, on the one hand, and the mounting challenges linked to the excessive dependence on Russian supply.

The relatively low energy efficiency of the Bulgarian economy makes it particularly vulnerable to energy supply disruptions. It also has the lowest number of days of normal oil consumption covered by storage, compared to Romania and Greece. The reliability of electricity supply benefits from a diverse power generation mix, although the excessive spike in peak electricity demand in winter is a key vulnerability. . Modelling assessments clearly show that the power system remains adequate even with a full coal phase out revealing the decarbonization of electricity generation is feasible also from an energy security point of view even if it means that Bulgaria becomes a net importer of electricity by 2030.

The relatively high share of natural gas in Greece’s electricity mix supports healthy capacity margins and helps balance the huge influx of intermittent renewables. While this contributes to lower reliability risk, it exposes the country to the high volatility of oil and gas prices and contributes higher affordability risks with high energy expenditures per capita and energy expenditure volatility. The country remains a net importer of electricity, a trend that may be reversed with the increase in renewable energy and storage penetration. A key point is that for the reliability of supply to be guaranteed on regional level, it would be crucial to complete all interconnection projects and improve the coordination of transborder capacity allocation among the three transmission system operators.

Romania’s reliability risk position has somewhat worsened between 2015 and 2019 on the back of transportation sector energy use and overall energy use per capita. That said Romania is the least vulnerable country to oil and gas supply disruptions as the country is a major producer of hydrocarbons and is yet to increase its natural gas-fired power generation that may expose it to reliability risks linked to the European gas market. In addition, Romania is well interconnected to other gas and power transmission systems in the region positioning it potentially as a major energy exporter over the next decade. Its diversified electricity generation portfolio with abundant hydropower, as well as nuclear means that a coal phase out is unlikely to undermine the adequacy of the power system even as massive amounts of solar and wind power are added to the system.

Sustainability Risk

The Sustainability pillar includes the climate and environmental factors that affect the sustainability of the national economy and its alignment with key EU climate objectives. Key risk factors include the emission intensity of the energy sector and the share of fossil fuels in key sectors such as electricity generation and transport, as well as in the overall national economy. It also includes a risk metric that evaluates the level of circularity of the national economy and the sustainability of land use.

High energy intensity and in particular fossil energy intensity contribute to a high climate risk for Bulgaria despite the improvement over the past several years. Reaching carbon neutrality by 2050 is possible but requires an overhaul of the country’s energy and climate strategy. A clear coal phase-out timeline is a must, as without it the current pledge to reduce CO2 emissions by 40% until 2026 is fanciful and could lead to even greater subsidies for the outdated coal fleet. Meanwhile, Bulgaria is experiencing a boom in private investment in renewable energy sources (15,000 MW of RES capacity has been announced by private companies), which are, however, bottlenecked by an unclear regulatory framework, lack of transparency of administrative procedures, corruption and state capture risks and low pubic acceptability.

The energy and fossil fuel intensity of the Greek economy have barely decreased despite the acceleration of RES-based investment. However, the sustainability risk trends are bound to change significantly in the 2020s as the Greek NECP calls for the decommissioning of all lignite plants by 2028 and goes further by calling for the decommissioning of 1700MW out of the 3904MW currently in operation by 2022. The aggressive coal phase-out strategy is coupled with an even more ambitious strategy for RES uptake in power generation. A total of 19 GW of renewables are expected to be operational by 2030 leading to potentially stranded fossil-fuel assets in natural gas and the need for greater imports of electricity from Italy and the Balkans. Nevertheless. and the slow electrification of transportation and industrial energy intensity are key future risks.

Romania has seen its sustainability risks fall by 15% since 2015 on the back of a strong decline in energy intensity (visible all across the SEE region), an increase in the share of renewables in power generation and the gradual reduction of coal-fired power supply to the system. RES expansion is likely to accelerate over much of the 2020s in combination with a rapid coal phase out as the operation of the country’s lignite fleet is no longer economically feasible at the current price of ETS emissions and the lack of available public funding support schemes for coal. A full decarbonization of the energy system and the transformation of the economy would require a much greater focus on the industrial and transportation sectors where there is a need for a consistent long-term policy for electrification via RES-based sources and the uptake of cutting-edge technologies for optimization of business process, the use of materials and low-carbon fuels.

General

The security of global reserves and production of key commodities (natural gas, oil, and coal), the volatility of crude oil prices are common to all countries. Additionally, the geopolitical risk sub-index reflects the security of oil and natural gas imports of the specific country, taking into account the country’s dependence on imports, especially from authoritarian states and its diversity of supply. Many governments in the region, including Bulgaria, Hungary, Greece, Romania, and Slovenia, are actually doubling down on gas infrastructure investments. These projects come on top of the already-built TurkStream gas pipeline, Nord Stream’s smaller but equally detrimental-to-energy-security twin in the Black Sea. Such a wasteful gas gamble will actually increase the dependence on Russia by between a third and 50%, stalling efforts to diversify supply and complete the European gas markets integration. The Turk Stream project has been instrumental in facilitating the Russian economic and political influence in Southeast Europe and demonstrates a number of severe governance deficiencies, including the lack of a detailed cost-benefit assessment of the project, or any public discussion on the consistency with the national long-term energy policy and security objectives.

Greece

Despite the integration of large volumes of renewable energy sources and the closing of coal-fired power plants, key sustainability risks remain higher than in Bulgaria and Romania. In particular, the share of non-CO2 electricity capacity remains significantly below that for Romania and Bulgaria. The energy consumption per capita in the transport sector has increased and also stands noticeably above the values Romania and Bulgaria. Meanwhile, mall gains in energy efficiency (especially in the household segment) and the massive uptake of natural gas in power generation are also key sources of vulnerability on the national level. Energy affordability risks, however, have decreased significantly. The fall of energy expenditures per capita has been a key driver behind the overall affordability risk decline. Nevertheless, compared to Romania and Bulgaria, energy expenditures in Greece remain noticeably higher.

General

The overall Index score reveals that all three SEE countries have significantly improved their energy and climate security over the last decade on the back of strengthening energy efficiency, more natural gas import diversity and the increase in renewable energy sources in power generation. The Southeast European region is particularly vulnerable to energy security risks not only because of its historically greater dependence on Russian fossil fuel imports, which has also contributed to the entrenching of powerful state capture networks that control strategic policy, but also because of the region’s excessive use of coal, the low energy efficiency of its economy and the high carbon intensity levels. SEE also faces a persistent energy poverty crisis and slower progress on market liberalisation, integration and the low-carbon transition.

Methodology

The current geopolitical crisis has clearly demonstrated that Europe needs to put energy security at the top of its policy priorities and make sure that it stays there even after the peak of the crisis subsides. Clearly establishing energy security as a core element of the EU’s energy strategy and synchronising energy security priorities with decarbonisation and market integration and liberalisation policies is a crucial first step with implications for the medium-term and long-term policy objectives. It is essential to take this step as soon as possible to ensure the long-term consistency of measures and investments.
The process of achieving common European goals has been hindered by a policy ambition gap due to widespread energy sector governance deficits in a number of member-states. Evidence-based policy instruments to monitor member-states’ progress such as an Energy and Climate Security Risk Index (ECSRI), allowing for an objective, comparative assessment, could become an EU-wide instrument for policy convergence. By using the Index, the EU would be able to further and deepen coordination of national policies across sectors and policy areas on the back of a long-term political, financial and social commitment.

The ECSRI has four pillars, reflecting the four dimensions of energy security risks: geopolitical, affordability, reliability, and sustainability. The Index covers 39 individual risk indicators, based on thousands of data points. While these individual factors are distributed between the four pillars, they remain closely interlinked. For instance, global crude prices are reflected in the geopolitical dimension via the assessment of their volatility, as well as in the affordability dimension, as they are also included in the analysis of the level of energy expenditures. Similarly, oil and gas consumption has an impact not only on energy expenditures, but also on the overall energy intensity of the economy, as well as GHG emissions.


The Index allows policy-makers and experts alike to fully reflect on a wide spectrum of risks associated with the high reliance on fossil fuels, as well as the risk mitigation potential of decarbonisation policies. In addition, the reliability dimension captures the risks associated with the structure of the energy system and its ability to absorb potential shocks. This is measured through indicators such as energy efficiency of different economic sectors, the resilience of the electricity system (transmission losses, density of the electricity grid, etc.), and petroleum/natural gas stock levels.


The ESCRI can improve the understanding and transparency of the most important energy security and climate vulnerabilities faced by EU member-states based on data-driven policy action. It would help track the progress of European countries towards the diversification of supply sources, the liberalization of energy markets, the decarbonization of key economic sectors, as well as the improvement of energy affordability and energy system reliability. It will also monitor the impact of climate policies on key environmental and sustainability indicators.


A critical element of this instrument is a common assessment of the risks related to natural gas, oil and electricity imports based on (i) overall reliance on imports, (ii) diversification of the import sources, and (iii) the reliance on authoritarian states for imports. Such an assessment for the EU and several key Member States clearly reveals the strong increase of security risks since 2014. It also demonstrates the historically much higher risk exposure of Southeast Europe compared to the EU-level risk. From this perspective, reduction of natural gas demand, avoiding a natural gas lock-in, a phase out of coal in combination with massive renewable energy-based transition and a smarter, more resilient and integrated electricity system would be key policy actions to make the European energy system much more resilient. This would result in an overall reduction in energy security risks.


The ECSRI will rely mainly on Eurostat data, with additional metrics that are not available there coming from the US Energy Information Administration (EIA), the Pathways explorer developed by CLIMACT, and national statistical authorities. For the global factors in the Geopolitics pillar, which are the same for all countries, the ECSRI for Germany and Italy will use the indicators from the Index of U.S. Energy Security Risks developed by the The Global Energy Institute (GEI). In cases when the preferred data for a particular indicator is not publicly available and cannot be measured directly, proxy estimates will be developed.

The individual risk metrics will be measured in different units, such as EUR per barrel for crude prices or toe per EUR 1000 GDP for the fossil energy intensity of the economy. To transform them into comparable indicators that use a common unit and can be assembled into an index, each risk metric will be normalised by setting its value in 2015 as 100. All other values will be measured in proportion to the base year. Hence, the index will reflect the relative change of the metric’s value to that base year and measures the trend of the level of risk over time.

The time period covered by the ECSRI is 2008-2019, reflecting key data availability in Eurostat. The choice of the base year, 2015, is intended to reflect the immediate aftermath of the Crimea crisis, as it is a key potential turning point and a missed opportunity for improving Europe’s energy security. It follows the collapse of global crude prices in 2014 and at the same the rise of a more aggressive Russia in the foreign policy domain. From this perspective, 2015 is when relatively low global crude oil and natural gas prices created favorable conditions for a ramp up of supply diversification efforts, while at the same time geopolitical signals should have incentivized European countries to make a U-turn on their foreign policy towards Russia. The use of 2015 as a base year will serve to highlight the strategic failures in Italy and Germany’s energy and climate security policies linked to Russia.