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Valuation of Energy Security for the United States

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Valuation of Energy Security for the United States Valuation of Energy Security for the United States Report to Congress January 2017 United States Department of Energy Washington, DC 20585 Contents Acknowledgments ......................................................................................................................................... 1 Executive Summary: The New Energy Security Paradigm ............................................................................ 2 I. Redefining U.S. Energy Security ................................................................................................................. 7 II. Energy Security Valuation Framework ...................................................................................................... 8 III. Policies Addressing Energy Security in the United States ...................................................................... 11 A. Consumers and the economy............................................................................................................. 11 B. Energy supply diversity and resiliency................................................................................................ 12 C. Well-functioning and competitive markets ........................................................................................ 13 D. National security objectives ............................................................................................................... 14 E. Environmental considerations ............................................................................................................ 15 IV. Policies Addressing Energy Security for U.S. Allies and Partners .......................................................... 16 V. Energy Security Applications in Federal Rulemaking .............................................................................. 18 VI. Valuation of Energy Security Benefits ................................................................................................... 19 A. General Quantification Opportunities ............................................................................................... 20 B. Quantification of Benefits for Consumers and the Economy ............................................................. 21 C. Quantification of Benefits for Energy Supply Diversity and Resiliency .............................................. 21 D. Quantification of Benefits for Well-Functioning and Competitive Markets ...................................... 22 E. Quantification of Benefits for National Security ................................................................................ 22 F. Quantification of Benefits for Environmental Considerations ........................................................... 23 Prologue: Valuing Energy Security in the United States ............................................................................. 25 Chapter 1: Energy Security Policy in the Oil and Natural Gas Sectors ........................................................ 29 I. Introduction ............................................................................................................................................. 29 II. Defining and Assessing Oil and Gas Energy Security in the United States.............................................. 31 A. Consumers and the Economy ............................................................................................................. 31 i. Managing Effects of Price Volatility by Managing Oil Intensity ....................................................................... 34 ii. Managing Effects on Consumers’ Finances .................................................................................................... 42 B. Oil and Natural Gas Supply Diversity and Resiliency .......................................................................... 43 i. Enhancing Supply Diversification .................................................................................................................... 46 ii. Enhancing Supply Resiliency ........................................................................................................................... 54 C. Well-Functioning and Competitive Energy Markets .......................................................................... 56 i. Ensuring Open Markets ................................................................................................................................... 57 ii. Providing Transparency in Data about Market Fundamentals ....................................................................... 59 iii. Improving Transparency and Efficiency in Infrastructure Permitting............................................................ 60 iv. Allowing Third-Party Access to Infrastructure ............................................................................................... 63 D. U.S. Trade Balance ............................................................................................................................. 63 E. National Security Objectives ............................................................................................................... 66 i. Maintaining Emergency Response Mechanisms ............................................................................................. 67 ii. Energy Diplomacy ........................................................................................................................................... 70 iii. Imposing Sanctions on Major Oil Producers .................................................................................................. 71 F. Environmental Considerations ........................................................................................................... 72 i. Reducing Demand for High-GHG Fuels ............................................................................................................ 72 ii. Improving Environmental Performance of the Energy Sector ....................................................................... 73 III. Assessing Energy Security for U.S. Allies and Partners .......................................................................... 75 A. North America .................................................................................................................................... 75 i. Canada ............................................................................................................................................................. 75 ii. Mexico ............................................................................................................................................................ 79 ii B. Europe ................................................................................................................................................ 82 C. Asia ..................................................................................................................................................... 87 i. Australia and New Zealand .............................................................................................................................. 88 ii. Korea and Japan ............................................................................................................................................. 91 D. Additional U.S. National Security Objectives in the Context of Allies and Partners .......................... 94 i. Maintaining Strategic Reserves ....................................................................................................................... 94 ii. Fostering Cooperation through Multilateral Organizations ........................................................................... 95 iii. Helping Emerging Producers Link to Global Markets .................................................................................... 95 Chapter 2: Energy Security Policy in the Electric Power Sector .................................................................. 97 I. Introduction: Electricity as National Security Asset ................................................................................. 97 II. Defining and Assessing Electricity Security in the United States .......................................................... 100 A. Energy Supply Diversity and Resiliency ............................................................................................ 100 i. Energy Security Challenges for Different Fuel Types ..................................................................................... 103 ii. Policies That Affect Fuel Diversity ................................................................................................................ 106 B. National Security Objectives ............................................................................................................ 106 i. Reliability: Future Trends and Policies .......................................................................................................... 107 ii. Policies That Affect Reliability ...................................................................................................................... 110 iii. Resilience: Future Trends and Policies ........................................................................................................ 115 iv. Policies That Affect Resilience and Cybersecurity ....................................................................................... 120 C. Well-Functioning and Competitive Electricity Markets ...................................................................
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